Activity Cost Pool Maintenance Materials Handling Setups Inspection Order processing Customer Support Annual Activity 10,000 Machine hours 30,000 Material moves 15,000 Setups 25,000 Quality inspections 25,000 Orders 500 Customers The company traces the costs of direct materials and direct labor to jobs (i.e. orders). Overhead costs (both manufacturing and non-manufacturing) are allocated to jobs using the activity-based costing system. These overhead costs are listed below: Indirect factory wages Other manufacturing overhead Selling and administrative expense $700,000 Total $250,000 $500,000 $1,450,000 The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Maintenance Materials Handling Setups Inspection Order processing customer support 20% 20% 0% 25% Indirect factory wages other manufacturing overhead Sellign and administrative expense 10% 25% 10% 0% 10% 10% 30% 40% 0% 0% 0% 0% 40% 60%

Activity Cost Pool Maintenance Materials Handling Setups Inspection Order processing Customer Support Annual Activity 10,000 Machine hours 30,000 Material moves 15,000 Setups 25,000 Quality inspections 25,000 Orders 500 Customers The company traces the costs of direct materials and direct labor to jobs (i.e. orders). Overhead costs (both manufacturing and non-manufacturing) are allocated to jobs using the activity-based costing system. These overhead costs are listed below: Indirect factory wages Other manufacturing overhead Selling and administrative expense $700,000 Total $250,000 $500,000 $1,450,000 The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Maintenance Materials Handling Setups Inspection Order processing customer support 20% 20% 0% 25% Indirect factory wages other manufacturing overhead Sellign and administrative expense 10% 25% 10% 0% 10% 10% 30% 40% 0% 0% 0% 0% 40% 60%

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Description: Activity Cost PoolMaintenanceMaterials HandlingSetupsInspectionOrder processingCustomer SupportAnnual Activity10,000 Machine hours30,000 Material moves15,000 Setups25,000 Quality inspections25,000 Orders500 CustomersThe company traces the costs of d

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 8PA: A company has traditionally allocated its overhead based on machine hours but had collected this...

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A company has the following information relating to its production costs: Compute the actual and applied overhead using the companys predetermined overhead rate of $23.92 per machine hour. Was the overhead over applied or under applied, and by how much?
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