Exercise 17-1 Computing plantwide overhead rates LO P1 Xie Company identified th
ID: 2538865 • Letter: E
Question
Exercise 17-1 Computing plantwide overhead rates LO P1 Xie Company identified the following activities, costs, and activity drivers for 2017. The company manufactures two types of go-karts: Deluxe and Basic. Activity Expected Costs Expected Activity Handling materials $ 625,000 100,000 parts Inspecting product 900,000 1,500 batches Processing purchase orders 105,000 700 orders Paying suppliers 175,000 500 invoices Insuring the factory 300,000 40,000 square feet Designing packaging 75,000 2 models Required: 1. Compute a single plantwide overhead rate, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours. 2. In January 2017, the Deluxe model required 2,500 direct labor hours and the basic model required 6,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate. *PLEASE SHOW ALL PARTS.*
Explanation / Answer
Answer to part 1
S. No
Particulars
Amount ($)
Expected Activity
a
Handling Materials
625000
100000
parts
b
Inspecting products
900000
1500
batches
c
Processing Purchase orders
105000
700
orders
d
Paying suppliers
175000
500
Invoices
e
Insuring the factory
300000
40000
Square feet
f
Designing and packing
75000
2
Models
g
Total Overheads [(a + b + c + d + e + f)
2180000
h
Budgeted Direct Labour hours
125000
i
Single plant wide overhead rate (2180000/125000)
17.44
Answer to part 2
Single plant wide overhead rate (2180000/125000)
17.44
Deluxe Model
2500
Overheads assigned to Deluxe model (17.44*2500)
43600
Single plant wide overhead rate (2180000/125000)
17.44
Basic Model
6000
Overheads assigned to Basic model (17.44*6000)
104640
Answer to part 1
S. No
Particulars
Amount ($)
Expected Activity
a
Handling Materials
625000
100000
parts
b
Inspecting products
900000
1500
batches
c
Processing Purchase orders
105000
700
orders
d
Paying suppliers
175000
500
Invoices
e
Insuring the factory
300000
40000
Square feet
f
Designing and packing
75000
2
Models
g
Total Overheads [(a + b + c + d + e + f)
2180000
h
Budgeted Direct Labour hours
125000
i
Single plant wide overhead rate (2180000/125000)
17.44
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