The Jester Manufacturing Company produces two products: One is a recreational wh

Question

The Jester Manufacturing Company produces two products: One is a recreational whitewater kayak molded and the other product is a high performance competition kayak model. Jester retained a consultant to create an activity based costing system and provided the following data:

How much overhead was assigned to the Recreational Kayaks using ABC. Please round to 2 decimals when calculating the PDORs.

Cost Pool Estimated Amount Driver Rec. Kayaks competition kayaks Building $35000 Square Footage 8000 2000 quality control $20000 number of inspection 300 200 materials ordering $25000 number of order 200 100

Explanation / Answer

Solution-

Under ABC,overhead is allocated on cost driver basis-

Product Cost Pool Estimated Amount Driver Rec. Kayaks
Units Competition kayaks
Units Total Calculation Result Building $ 35,000.00 Square Footage 8000 2000 10000 35000/10000*8000 $        28,000.00 Quality Control $ 20,000.00 number of inspection 300 200 500 20000/500*300 $        12,000.00 Materials Ordering $ 25,000.00 number of order 200 100 300 25000/300*200 $        16,666.67

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