Blitzer Enterprises has identified three cost pools and three corresponding cost

Question

Blitzer Enterprises has identified three cost pools and three corresponding cost drivers to allocate overhead costs. The following estimates are provided for the coming year:



Cost Pool Overhead Costs Cost driver Activity level
Supervision of direct labor $480,000 Direct labor-hours 800,000
Machine maintenance $220,000 Machine-hours 550,000
Facility rent $260,000 Square feet of area 100,000
Total overhead costs $960,000

The accounting records show the Gergen Job consumed the following resources:

Cost driver Actual level
Direct labor-hours 600
Machine-hours 2,100
Square feet of area 90

27. If direct labor-hours are considered as the only overhead cost driver, what is the single cost driver rate for Blitzer Enterprises?
A) $0.60 per direct labor-hour
B) $0.80 per direct labor-hour
C) $1.20 per direct labor-hour
D) $6.00 per direct labor-hour

28. Using direct labor-hours as the only overhead cost driver, what is the amount of overhead costs allocated to the Gergen Job?
A) $320
B) $720
C) $1,200
D) $1,360

Explanation / Answer

27. C) $1.20 per direct labor-hour 28. B) $720 29. D) $0.60 per direct labor hour, $0.40 per machine hour, $2.60 per sq ft 30. B) smoothing costs. 31. A) can be used to eliminate non-value-added activities. 32. A) $20.83 33. A) high cost to serve and low margin.

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