For Year 4, Carsem is considoring the use of activity-based costing. Carsem Inc,

Question

For Year 4, Carsem is considoring the use of activity-based costing. Carsem Inc, has identified 3 different activity pools for its overhead costs The estimated activity levels for the chosen activity drivers used for each pool are summarized below Estimated activity levels Cost pools Pool A Pool B Pool C Activity Driver Number of machine setups.. Hours of quality-testing. Drect labor hours... for the year 16800 setups 6000 testing hours 48000 direct labor hours Total estimated overhead costs of $2652000 for Year4 were allocated to the 3 pools as Pool A: $2016000 Pool B: $252000 Pool C: $384000 The first boat Carsem manufactured in Year4 was for customer #1060. The process requred the tonowing resources: 377320 cost of direct materials $101800 cost of direct labor 3030 direct labor hours 1048 machine setups 400 quality-testing hours 1. Assume Carsem used a plant-wide overmead rate based on direct labor hours. What would Carsem use as the activity rate? Round your rate to the nearest dollar, When rounding, only consider the first 2 numbers after the decimal point Do not use any punctuation. Example: Assume you get answer that is 16.xx If 16.00 to 16.49 round to 16 I 16.50 to 16.99 round to 17 per direct labor hour 2. For all of the following questions, assume Carsem uses activity-based costing and the 3 pools listed above. a. What would Carsem use as the activity rate for pool C? Round your rate to the nearest dollar, (Use the rounding ruies in question 1.) Do not use any punctuation. How much of the Pool B (quality-testing) overhead is allocated to the boat manufactured for customer #10607 Do not use any punctuation C. How much total overhead is allocated to the boat manufactured for Customer #10607 Use Round all activity rates to the nearest dollar before you do this computation. Do not use any punctuation activity rates, not proportions or you may get different answers.

Explanation / Answer

Req 1: Plant wide OH rate: Estimated Oh / Estimated DLH $2652,000 /48,000 DLH = $55.25 per DLH Req :2 STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Pool A setups 2,016,000 16,800 120.00 Pool B Testing Hours 252,000 6,000 42.00 Pool C DLH 384,000 48,000 8.00 A. Activity rate for POOL C: $ 8.00 per DLH B. Overheads cost of POOL B assigned to customer (400 hours @ 42): $16,800 C. Total Overheads assigned to Job: Pool A (1048 setups @$120) 125760 Pool B (400 hours @42) 16800 Pool C (3030 DLH @ 8) 24240 Total Overheads 166800

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