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 Activity Cost $19,600 $ 4,700 4,700 parts $ 9,400 4,700 machine hour:s Driver 28 batches Setting up machinfes Inspecting components Providing utilities Overhead has been applied to output at a rate of 55% of direct labor costs. The following data pertain to Job 615 $2,800 $3,800 Direct materials Direct labor Batches Number of parts Machine hours 6 batches 400 parts 600 machine hours Required 1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level. Setting up machines Providing utilities 2. what is the total cost of Job 615 if Business Solutions applies overhead at 55% of direct labor cost? otal 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 $ Direct materials 2,800 direct labor 3,800 overhead applied (3,800*55%) 2090 total cost of Job 615 8,690 total cost $8,690 3) total cost $ Direct materials 2,800 direct labor 3,800 overhead applied Setting up machines (19600/28)*6 4200 inspecting components (4,700/4700)*400 400 providing utilities (9400/4700)*600 1200 total cost 12,400 total cost $12,400

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