Hansen Company uses activity-based costing. The factory overhead budget for the
ID: 341737 • Letter: H
Question
Hansen Company uses activity-based costing. The factory overhead budget for the coming period is $1,053,000, consisting of the following:
Cost Pool
Budgeted Amount
Supervision
$320,000
Machine usage
420,000
Machine setups
187,000
Design changes
126,000
Totals
$1,053,000
The potential allocation bases and their estimated amounts were as follows:
Allocation Base
Budgeted Amount
Number of design changes
35
Number of setups
110
Machine hours
6,000
Direct labor hours
10,000
a. Determine the overhead rate for each cost pool, using the most appropriate allocation base for each pool.
Cost Pool
Budgeted Amount
Supervision
$320,000
Machine usage
420,000
Machine setups
187,000
Design changes
126,000
Totals
$1,053,000
Explanation / Answer
Answer:
a. Determine the overhead rate for each cost pool, using the most appropriate allocation base for each pool.
Cost Pool
Budgeted
Amount
Divided
by
overhead
rate
A
B
A/B
Supervision
320000
10,000
Direct labor hours
32
Machine usage
420000
6,000
Machine hours
70
Machine setups
187000
110
Number of setups
1700
Design changes
126000
35
Number of design changes
3600
Totals
1053000
Cost Pool
Budgeted
Amount
Divided
by
overhead
rate
A
B
A/B
Supervision
320000
10,000
Direct labor hours
32
Machine usage
420000
6,000
Machine hours
70
Machine setups
187000
110
Number of setups
1700
Design changes
126000
35
Number of design changes
3600
Totals
1053000
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