Exercise 7-9 Second-Stage Allocation to an Order [LO7-4] Durban Metal Products,

Question

Exercise 7-9 Second-Stage Allocation to an Order [LO7-4] Durban Metal Products, Ltd., of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rowers. The company uses an activity- based costing system for internal decision-making purposes. The company has four activity cost pools as listed below: Activity Cost Activity Measure Number of direct Activity Rate per direct per customer Order size S 17 Number of customer orders Number of testing hours Number of sales calls S 368.00 orders order $70.00 hour per testing pe r sales call 1.490.00 director of the would like information The cost of a recently completed order for heavy-duty trailer axles. The order required 180 direct labor-hours, 19 hours of product testing, and 5 sales calls. the Required: Prepare a report summarizing the overhead costs assigned to the order for heavy-duty trailer axles. What is the total overhead cost assigned to the order? ABC Cost Order size Product testin Selli Total overhead cost

Explanation / Answer

Activity cost pool ABC cost Order size 3060 =180*17 Customer orders 368 Product testing 1330 =70*19 Selling 7450 =1490*5 Total overhead cost 12208

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