3. ACTIVITY-BASED COSTING, COST DRIVERS Southern Metals Company's controller has established these overhead cost pools and cost drivers for 2001: Budgeted Overhead Expected Cost Driver Overhead Cost Pool Activity Level Machine setups $117,868 Number of setups 40 Power 341,120 Machine-hours 21,320 Materials handling 85,000 Materials weight 34,000 Ib. Quality control 143,500 Number of units 82,000 units Other overhead 184,500 Direct labor-hours 14,760 hours $871,988 During March 2001, Southern received an order for 1,500 machine tools and produced them. The order required the following: Machine setups 7 Machine-hours 3,250 Materials 4,250 Ib. Direct labor-hours 2,750 hours Required 1. Calculate the predetermined factory overhead rates for cost drivers. What was the total factory overhead assigned to fill the order under the activity-based costing approach? 2. 3. Suppose that a single predetermined factory overhead rate based on machine-hours was used to apply factory overhead. What was the pre- determined factory overhead rate? What amount of factory overhead was applied to the order?
3. ACTIVITY-BASED COSTING, COST DRIVERS Southern Metals Company's controller has established these overhead cost pools and cost drivers for 2001: Budgeted Overhead Expected Cost Driver Overhead Cost Pool Activity Level Machine setups $117,868 Number of setups 40 Power 341,120 Machine-hours 21,320 Materials handling 85,000 Materials weight 34,000 Ib. Quality control 143,500 Number of units 82,000 units Other overhead 184,500 Direct labor-hours 14,760 hours $871,988 During March 2001, Southern received an order for 1,500 machine tools and produced them. The order required the following: Machine setups 7 Machine-hours 3,250 Materials 4,250 Ib. Direct labor-hours 2,750 hours Required 1. Calculate the predetermined factory overhead rates for cost drivers. What was the total factory overhead assigned to fill the order under the activity-based costing approach? 2. 3. Suppose that a single predetermined factory overhead rate based on machine-hours was used to apply factory overhead. What was the pre- determined factory overhead rate? What amount of factory overhead was applied to the order?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 21E: Refer to the data in Exercise 7.20. The company has decided to use the sequential method of...
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Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:3.
ACTIVITY-BASED COSTING, COST DRIVERS Southern Metals Company's
controller has established these overhead cost pools and cost drivers for
2001:
Budgeted
Overhead
Expected
Cost Driver
Overhead Cost Pool
Activity Level
Machine setups
$117,868
Number of setups
40
Power
341,120
Machine-hours
21,320
Materials handling
85,000
Materials weight
34,000 Ib.
Quality control
143,500
Number of units
82,000 units
Other overhead
184,500
$871,988
Direct labor-hours
14,760 hours
During March 2001, Southern received an order for 1,500 machine tools and
produced them. The order required the following:
Machine setups
7
Machine-hours
3,250
Materials
4,250 Ib.
Direct labor-hours
2,750 hours
Required
Calculate the predetermined factory overhead rates for cost drivers.
What was the total factory overhead assigned to fill the order under the
activity-based costing approach?
Suppose that a single predetermined factory overhead rate based on
machine-hours was used to apply factory overhead. What was the pre-
determined factory overhead rate? What amount of factory overhead
was applied to the order?
1.
2.
3.
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