Hi and thank you, I\'ve already completed reuirment 1 but need assistance on the

ID: 2550610 • Letter: H

Question

Hi and thank you, I've already completed reuirment 1 but need assistance on the rest.

3. Expected usage and costs for manufacturing overhead Skath Industries manufactures a variety of custom products. The company has traditionally used a plantwide activities for the upcoming year are as follows manufacturing overhead rate based on machine hours to Click the icon to view the expected usage and costs.) allocate manufacturing overhead to its products. The company estimates that it will incur $860,000 in total manufacturing overhead costs in the upcoming year and will 3(Click the icon to view the usage for Job 354) use 10,000 machine hours Click the icon to view the additional information about the hazardous waste disposal fees.) During the year, Job 354 is started and completed. Usage for this job follows: Read the requirements Requirement 1. Calculate the cost of Job 354 using the traditional plantwide manufacturing overhead rate based on machine hours Begin by calculating the plantwide overhead rate. First identify the formula used to compute the plantwide overhead rate then compute the rate. (Abbreviations used: MOHmanufacturing overhead, mfgmanufacturing) Total estimated manufacturing costs I Estimated total machine hours - Plantwide mfg. overhead rate 860,000 10,000 86 Calculate the cost of Job 354 Job Cost Record JOB 354 Direct materials Direct labor Manufacturing overhead allocated Total job cost Requirement 2. Calculate the cost of Job 354 using activity-based costing Manufacturing Costs 6,800 1,050 8,600 16,450 Begin by calculating the allocation rate for each activity. First determine the formula to compute the allocation rate in an activity-based costing system, then compute the rate for each activity. (Abbreviations used: est = estimated, MH-machine hours, Mach.-Machine, Eng.-Engineering) Activity cost allocation rate Mach. maintenance Eng. change orders Waste disposal per MH per order per pound

Explanation / Answer

Requirement 2

Activity Based Costing

Formula

Total Estimated Activity Cost Pool

Total est. activity allocation base

Activity Cost Allocation Rate

Machine Maintenance

$ 200,000

10000

$ 20

per MH

Engineering Change Orders

$ 240,000

6000

$ 40

per order

Hazardous waste Disposal

$ 420,000

1500

$ 280

per pound

Job Cost Record

JOB 354

Manufacturing Costs

Maintenance Costs

$ 2,000

=100*20

Engineering Costs

$ 160

=4*40

waste Disposal costs

$ 2,2400

=80*280

Total Job Cost

$ 24,560

Requirement 3

The cost estimate based on the

activity-based costing rates

would provide more useful information because this cost estimate takes into account

the specific resources used by each product

This information can be used to

price jobs based on more accurate costs