Fischer Company identified the following activities, costs, and activity drivers

Question

Fischer Company identified the following activities, costs, and activity drivers:

a. Compute a plantwide overhead rate assuming the company assigns overhead based on 70,000 budgeted direct labor hours (Round to two decimals).

b. Compute separate rates for each of the four activities using the activity-based costing.

Activity Expected Costs Expected Activity Handling Parts 425,000 25,00 parts in stock Inspecting Parts 390,000 940 batches Processing Purchase Orders 220,000 440 orders Designing Packaging 230,000 5 models

Explanation / Answer

a. Plantwide Overhead Rate = Total Expected Costs / Total Direct Labor Hours

= ( $ 1,265,000 ) / 70,000 Direct Labor Hours

= $ 18.07

Hence the correct answer is $ 18.07 per direct labor hour.

Note :

1. Total Expected Costs =

b.

The correct answer is :

Note :

2. The answer has been rounded off to two decimal places.

Activity Expected Costs Handling Parts 4,25,000 Inspecting Parts 3,90,000 Processing Purchase Orders 2,20,000 Designing Packaging 2,30,000 12,65,000

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