Oxley Machining Company has identified the following overhead activities, cost,
ID: 2540602 • Letter: O
Question
Oxley Machining Company has identified the following overhead activities, cost, and activity drivers for the coming year Activity Setting up Inspecting Grinding Receiving Expected Cost $60,000 $45,000 $90,000 Activity Driver Number of setups Inspection hours Machine hours Number of parts Activity Capacity 300 4,500 18,000 50,000 The company produces several different machine widgets used by other manufacturers Information on separate batches for two of these widgets are: Widget A et 5950 $600 50 Direct materials $850 Direct labour Units completed 100 No. of setups Inspection hours 4 Machine hours 20 Parts used $600 30 40 20 The company's normal activity is 20,000 direct labour hours. Each batch uses 50 hours of direct labor. Upon investigation, you discover that Receiving employs one worker, who spends 80% of her time on the receiving activity and 20% of her time on inspecting products. Her salary is $40,000. * Add in the following sentence: Inspecting has taken into account the worker's salary but not Receiving. In addition, receiving also uses a forklift, at a cost of $8,000 per year for amortization and fuel. The forklift is used only in receiving. 24. Ifpre-determined overhead-rate is-$9.00, Actual factory overhead incurred during November would be A. $67,500 B. $77,500 C. $76,000 D. $73,500 E. $114,000Explanation / Answer
Activity Expected Cost Activity Capacity Activity Cost per driver Actual Activity* Total Overhead Setting Up 60000 300 200 150 30000 Inspecting 45000 4500 10 500 5000 Grinding 90000 18000 5 3500 17500 Receiving 40000 50000 0.8 4000 3200 (40000*80%+8000) 55700 Actual Activity A B Total Units 100 50 No of set up 1 1 Inspection Hours 4 2 Machiner Hours 20 30 Parts Used 20 40 Setting Up (Unit* Set UP) 100 50 150 Inspectin (unit*Inspection Hours) 400 100 500 Grinding (Unit*Machine Hour) 2000 1500 3500 Receiving (Unit* parts) 2000 2000 4000
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