Claire Company produces Tablets and Books. Total overhead costs traditionally ha

Question

Claire Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products.

Other information is as follows:

Activity Pool Department Costs Cost Driver Binding $267,938 Number of units Printing 829,312 Machine hours Product design 213,180 Change orders General 627,836 None    Total overhead costs $1,938,266

Explanation / Answer

Total activity Tablets Books Binding 63000+20300=83300 267938*63000/83300= 202642.18 267938*20300/83300 = 65295.82 Printing 126000+120000= 246000 829312 *126000/246000 = 424769.56 829312*120000/246000 = 404542.44 Product design 1300+2600 = 3900 627836 *1300/3900 = 209278.67 627836*2600/3900= 418557.33 Total 836690.41 888395.59 Units 63000 20300 Per unit overhead cost 13.28 43.76 Tablet Book Direct material 3.13 10.25 Direct labor 3.92 7.82 overhead 13.28 43.76 Unit cost 20.33 61.83

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