A company has identified the following overhead costs and cost drivers for the c

Question

A company has identified the following overhead costs and cost drivers for the coming year:

Budgeted direct labor cost was $220,000 and budgeted direct material cost was $620,000. The following information was collected on three jobs that were completed during the year:

    

If the company uses activity-based costing (ABC), how much overhead cost should be assigned to Job 101?

$1,435.

$725.

$1,703.

$5,250.

A company has identified the following overhead costs and cost drivers for the coming year:

Explanation / Answer

Answer is $ 725 as shown below

Budgeted cost / Activity level Cost per cost driver Machine setup $25,300/220 = $                115 per setup $115 x1 (no of setups) $        115 Inspection $124200/4600 = $                  27 per inspection $27 x10 (no of inspections) $        270 Material Handling $99,200/ 6200 = $                  16 per move $16 x 15 (no of moves) $        240 Engineering $12400/620 = $                  20 per engineering hours) $20 x 5 (No of eng hours) $        100 Total overhead cost to be assigned to Job 101 $        725

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