Chapter 4 Problem Number 3 The following information applies to the questions di

Question

Chapter 4 Problem Number 3

The following information applies to the questions displayed belowJ Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its compony records Production Activity Grinding Indirect Labor Indirect Materials Other Overheod 330,000 400,000 520,000 S 210,000 Product modification Providing power System calibration $ 250,000 Additional information on the drivers for its production octivities follows. Grinding 13,000 machine hours 13,000 machine hours Product modification Providing power System calibration 1,300 engineering hours 13,000 direct labor hours 250 batches Job 3175 Job 4286 2,375 units 4,500 MH 190 Number of units units Mochine hours Engineering hours Batches 450 MH 33 eng.hours 25 batches 26 eng.hours 75 batches 4,320 Direct labor hours 480 DLH DLH

Explanation / Answer

Ans:

Calculation of activity rate

The overhead cost per unit for job 3175 = overhead incurred / number of units

= $80735.17 / 190

= $424.92 per unit

The overhead cost per unit for job 4286 = overhead incurred / number of units

= $340583.6 / 2375

= $143.40 pe unit

Activity Overhead Cost Activity Drivers Activity rate = overhead cost / activity drivers Grinding & Polishing $540,000 Machine hours =26,000 $20.78 Product modification $400,000 Engineering hours =1300 $307.69 Providing power $250,000 Direct labor hours =13,000 $19.23 System calibration $520,000 Batches = 250 $2080

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