In the past, Best Car has used direct labor hours as a basis of allocating overh
ID: 340901 • Letter: I
Question
In the past, Best Car has used direct labor hours as a basis of allocating overhead. Now, that they are looking to experiment with ABC, they have identified the following activities, activity cost pools and cost drivers in its manufacturing overhead as shown in the ABC schedule. The cost driver quantity per product line is 80% of total cost driver quantity for product A; and 20% for product B.
Required:
1) Complete the schedule below
2) Compute overhead for model A
3) Compute overhead for model B
Product B
8,000.00
Activity Activity cost pool Cost driver Cost driver qty Pool rate Product Line Cost driver quantity per product line Activity cost per product line Product Line production Volume Activity cost per unit of product 1. Purchasing $ 30,000.00 Purchase orders 1,000 A Product A 10,000.00 BProduct B
8,000.00
Total Total 18,000.00 2. Machine related $ 2,000,000.00 Machine hours 250,000 A B Total 3. Set up $ 124,000.00 Production runs 120,000 A B Total 4. Quality Assurance $ 55,000.00 Inspection Hours 5,000 A B Total 5. Facility $ 2,400,000.00 Machine hours 250,000 A B Total Total $ 4,609,000.00 Overhead A Overhead BExplanation / Answer
Solution:
Activity
Activity cost pool
Cost driver
Cost driver qty
Pool rate
Product Line
Cost driver quantity per product line
Activity cost per product line (Pool Rate * Quantity Per Product Line)
Product Line production Volume
Activity cost per unit of product(Product line cost / Production Volume)
1. Purchasing
$30,000
Purchase orders
1000
$30.000
A
800
$24,000
Product A 10,000.00
$2.40
B
200
$6,000
Product B 8,000.00
$0.75
Total
1000
Total 18,000.00
2. Machine related
$2,000,000
Machine hours
250000
$8.000
A
200000
$1,600,000
Product A 10,000.00
$160.00
B
50000
$400,000
Product B 8,000.00
$50.00
Total
250000
Total 18,000.00
3. Set up
124000
Production runs
120000
$1.033
A
96000
$99,200
Product A 10,000.00
$9.92
B
24000
$24,800
Product B 8,000.00
$3.10
Total
120000
Total 18,000.00
4. Quality Assurance
55000
Inspection Hours
5000
$11.000
A
4000
$44,000
Product A 10,000.00
$4.40
B
1000
$11,000
Product B 8,000.00
$1.38
Total
5000
Total 18,000.00
5. Facility
2400000
Machine hours
250000
$9.600
A
200000
$1,920,000
Product A 10,000.00
$192.00
B
50000
$480,000
Product B 8,000.00
$60.00
Total
250000
Total 18,000.00
Total
$4,609,000
Overhead A
$368.72
(2.4 + 160 + 9.92 + 4.4 + 192)
Overhead B
$115.23
(0.75+50+3.1+1.38+60)
Note --- Overhead For Product Line A is calculated per unit
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Activity
Activity cost pool
Cost driver
Cost driver qty
Pool rate
Product Line
Cost driver quantity per product line
Activity cost per product line (Pool Rate * Quantity Per Product Line)
Product Line production Volume
Activity cost per unit of product(Product line cost / Production Volume)
1. Purchasing
$30,000
Purchase orders
1000
$30.000
A
800
$24,000
Product A 10,000.00
$2.40
B
200
$6,000
Product B 8,000.00
$0.75
Total
1000
Total 18,000.00
2. Machine related
$2,000,000
Machine hours
250000
$8.000
A
200000
$1,600,000
Product A 10,000.00
$160.00
B
50000
$400,000
Product B 8,000.00
$50.00
Total
250000
Total 18,000.00
3. Set up
124000
Production runs
120000
$1.033
A
96000
$99,200
Product A 10,000.00
$9.92
B
24000
$24,800
Product B 8,000.00
$3.10
Total
120000
Total 18,000.00
4. Quality Assurance
55000
Inspection Hours
5000
$11.000
A
4000
$44,000
Product A 10,000.00
$4.40
B
1000
$11,000
Product B 8,000.00
$1.38
Total
5000
Total 18,000.00
5. Facility
2400000
Machine hours
250000
$9.600
A
200000
$1,920,000
Product A 10,000.00
$192.00
B
50000
$480,000
Product B 8,000.00
$60.00
Total
250000
Total 18,000.00
Total
$4,609,000
Overhead A
$368.72
(2.4 + 160 + 9.92 + 4.4 + 192)
Overhead B
$115.23
(0.75+50+3.1+1.38+60)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.