Activity Cost Pools Estimated Overhead Expected Use of Cost Drivers per Activity

Question

Activity Cost Pools

Estimated
Overhead

Expected Use of
Cost Drivers per Activity

Overhead Rates

$

Spud, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2017.

Activity Cost Pools

Estimated
Overhead

Expected Use of
Cost Drivers per Activity

Ordering and receiving $94,047 14,100 orders Food processing 437,360 56,000 machine hours Packaging 1,544,400 440,000 labor hours
For 2017, the company had 11,200 orders and used 49,800 machine hours, and labor hours totaled 504,000.

Explanation / Answer

Answer 1. Overhead Rates for each Activity Estimated Overhead Expected use of Cost Driver per Activity Overhead Rates Ordering & Receiving                94,047           14,100 Orders           6.67 Per Order Food Processing              437,360           56,000 Mach. Hrs           7.81 Per Mach. Hrs Packaging          1,544,400        440,000 Lab. Hrs           3.51 Per Lab. Hrs Answer 2. Calculation Of Total Overhead applied Overhead Applied Ordering & Receiving 11200 Orders              74,704 Food Processing 49800 Mach. Hrs            388,938 Packaging 504000 Lab. Hrs        1,769,040 Total Overhead Applied        2,232,682

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