Sheridan Publishing identified the following overhead activities, their respecti

Question

Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes e of Textbook Activity (Cost) Machine maintenance ($300,000) Setups ($660,000) Packing ($172,000) Photo development ($476,000) Cost Driver Deluxe Moderate Economy 1,200 10 Number of machine hours Number of setups Number of cartons Number of pictures 300 30 15 4,000 900 15 30 2,000 1 , 000 Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings Required a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Deluxe 60,000 Moderate 180,000 Economy 240,000

Explanation / Answer

a)Total Overhead to be allocated = 300000+660000+172000+476000=1608000

Total machine hours = 300+900+1200=2400

Overhead rate per MH= 1608000/2400 =$ 670 per MH

b)

Deluxe moderate Economy Overhead allocated 300*670=201000 900*670=603000 1200*670=804000 number of books 60000 180000 240000 cost per book 201000/60000= $ 3.35 603000/180000=$ 3.35 3.35

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