Among many other products, TriTech has two switches, Standard and Elite switches

Question

Among many other products, TriTech has two switches, Standard and Elite switches. Standard switches are a high-volume product that the company makes in large batches, while Elite switches are a specialty product that is fairly low in sales volume.

Information about Standard and Elite usage of the different activities follows:

2. Use this predetermined overhead rate to calculate the amount of overhead to apply to Standard and Elite switches, based on their usage of direct labor hours.

Standard Elite Direct labor hours 3,000 310 Number of setups 1 13 Number of design changes 3 19 File Home Insert Page Layout Formulas DataReviewView Tell me what you want to do Calibri 111 A A e wrap Text Number Copy Format Painter Paste _ Merge & Center $ 96 , '08 Clipboard Font Alignment Number E5 619100 1 Cost Pool Cost Driver Total Amount Total Amount of Activity 112,500 180 410 $675,000 3 Maintenance costs Direct labor hours 4 Setup costs 5 Engineering costs Number of design changes Number of setups 459,000 619,100 $1,753,100 10 12 13 16 17 18 19 21 23

Explanation / Answer

1. Overhead Rate as per direct labor hour

Standard: 1753100*3000/112500

= 46750(Approx.)

Elite: 1753100*310/112500

= 4831(Approx.)

2.As per ABC costing:

Sandard= 675000*3000/112500+459000*1/180+619100*3/410

= 25080

Elite= 675000*310/112500+459000*13/180+619100*19/410

= 63700

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