1. What is the total cost of Job 6.15 if Business Solutions applies overhead at

Question

1. What is the total cost of Job 6.15 if Business Solutions applies overhead at 50% of direct labor cost?

2. What is the total cost of Job 6.15 if Business Solutions uses activity-based costing?

After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Rey found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows. Activity Cost $ 18,900 21 batches 4,400 4,400 parts $ 8,200 4,100 machine hours Driver Setting up machines Inspecting components Providing utilities Overhead has been applied to output at a rate of 50% of direct labor costs. The following data pertain to Job 6.15. Direct materials Direct labor Batches 1,600 Number of parts 440 parts 2,400 Machine hours 600 machine hours 3 batches

Explanation / Answer

1. The correct answer is $ 5,200

Note :

2. The correct answer is $ 8,340

Note :

a. Activity Rate and Overhead Calculation :

2. Total Cost :

Direct materials $ 1,600   Direct labor $ 2,400 Overhead ( 50% * $ 2,800) $ 1,200 5,200

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