Serial Problem Business Solutions LO P3 After reading an article about activity-

Question

Serial Problem Business Solutions LO P3

After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.

Overhead has been applied to output at a rate of 55% of direct labor costs. The following data pertain to Job 615.

Required:
1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level.
  

2. What is the total cost of Job 615 if Business Solutions applies overhead at 55% of direct labor cost?
  

3. What is the total cost of Job 615 if Business Solutions uses activity-based costing?

Activity Cost Driver Setting up machinfes $ 15,120 21 batches Inspecting components $ 5,300 5,300 parts Providing utilities $ 10,600 5,300 machine hours

Overhead has been applied to output at a rate of 55% of direct labor costs. The following data pertain to Job 615.

Direct materials $ 2,700 Direct labor $ 3,400 Batches 3 batches Number of parts 580 parts Machine hours 540 machine hours

Required:
1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level.
  

Setting up machines Inspecting components Providing utilities

2. What is the total cost of Job 615 if Business Solutions applies overhead at 55% of direct labor cost?
  

Total cost

3. What is the total cost of Job 615 if Business Solutions uses activity-based costing?

Total manufacturing cost

Explanation / Answer

1. Setting up machines - Batch level

Inspecting components - Unit level

Providing utilities- Facility level

2. Total cost of Job 615 :

3. Total cost by using ABC costing method:

Looking forward for your upvote.

Providing utilities- Facility level

2. Total cost of Job 615 :

Direct materials $ 2,700 Direct labor $ 3,400 Overheads (55% of 3400) $ 1,870 Total $7,970

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