A plant has two categories of overhead: maintenance and inspection. Costs expect

ID: 2514550 • Letter: A

Question

A plant has two categories of overhead: maintenance and inspection.

Costs expected for these categories for the coming year are as follows:

Machine maintenance $120,000

Inspection $200,000

Total expected overhead: $320,000 (120,000 + 200,000 from above)

Expected activity levels for the coming year are as follows:

80,000 direct labor hours

40,000 machine hours

2,500 inspections

The following data has been assembled for use in developing a bid for a proposed job:

What would be the total cost of the potential using the activity-based costing and the appropriate cost drivers?

Direct materials $1,500 Direct labor $5,000 Machine hours 400 Number of inspections 6 Direct labor hours 750

Total cost of the potential using the activity-based costing and the appropriate cost drivers is $8,180

Direct materials $1,500

Direct labour $5,000

Overhead:

($1,20,000/40,000) x 400 $1,200

($2,00,000/2500) x 6 $480

Total cost $8,180

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