Ivory Corporation manufactures two products (A and B). The overhead costs have been divided into four cost pools that use the following activity drivers: Product Number of Orders Number of Set-ups Number of Labor Transactions Labor Hours A B Cost per pool 20 5 Rs.15,000 35 70 Rs.8,400 1,000 1,500 Rs.120,000 75 125 Rs.40,000 Required: Compute the allocation rates for each of the activity drivers listed. Allocate the overhead cost to Product A and B using activity-based-costing. Compute the overhead rate using machine hours under the functional based costing system.
Ivory Corporation manufactures two products (A and B). The overhead costs have been divided into four cost pools that use the following activity drivers: Product Number of Orders Number of Set-ups Number of Labor Transactions Labor Hours A B Cost per pool 20 5 Rs.15,000 35 70 Rs.8,400 1,000 1,500 Rs.120,000 75 125 Rs.40,000 Required: Compute the allocation rates for each of the activity drivers listed. Allocate the overhead cost to Product A and B using activity-based-costing. Compute the overhead rate using machine hours under the functional based costing system.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 5CE: Roberts Company produces two weed eaters: basic and advanced. The company has four activities:...
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Question No.4
Ivory Corporation manufactures two products (A and B). The overhead costs have been divided into four cost pools that use the following activity drivers:
|
Product |
Number of Orders |
Number of Set-ups |
Number of Labor Transactions |
Labor Hours |
|
A B Cost per pool |
20 5 Rs.15,000 |
35 70 Rs.8,400 |
1,000 1,500 Rs.120,000 |
75 125 Rs.40,000 |
Required:
- Compute the allocation rates for each of the activity drivers listed.
- Allocate the overhead cost to Product A and B using activity-based-costing.
- Compute the overhead rate using machine hours under the functional based costing system.
- Allocate the overhead cost to Product A and B using the functional-based costing system overhead rate calculated in part C.
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