Terry Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows. Activity Pools Repair and maintenance on assembly machine Cost Pool Total Cost Driver Number of units produced 121,800 Number of programming Programming cost 94,240 hours Number of inspections Number of tests Software inspections Product testing 7,560 11,780 $235,380 Total overhead cost Expected activity for each product follows. Number of Number Number Programming of Units of Number Inspections of Tests Hours Decoder 21,000 2,300 182 1,300 P Decoder 1,500 37,000 98 1,800 Q Total 58,000 3,800 280 3,100 Required: a. Compute the overhead rate for each activity pool. (Round your answers to 2 decimal places.) Allocation Rate Activity Pools Decoder P Decoder Q Repair and maintenance on assembly machine Programming cost Software inspections Product testing b. Determine the overhead cost allocated to each product. (Round intermed iate calculations to 2 decimal places.) Total Allocated Cost Decoder P Decoder Q
Terry Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows. Activity Pools Repair and maintenance on assembly machine Cost Pool Total Cost Driver Number of units produced 121,800 Number of programming Programming cost 94,240 hours Number of inspections Number of tests Software inspections Product testing 7,560 11,780 $235,380 Total overhead cost Expected activity for each product follows. Number of Number Number Programming of Units of Number Inspections of Tests Hours Decoder 21,000 2,300 182 1,300 P Decoder 1,500 37,000 98 1,800 Q Total 58,000 3,800 280 3,100 Required: a. Compute the overhead rate for each activity pool. (Round your answers to 2 decimal places.) Allocation Rate Activity Pools Decoder P Decoder Q Repair and maintenance on assembly machine Programming cost Software inspections Product testing b. Determine the overhead cost allocated to each product. (Round intermed iate calculations to 2 decimal places.) Total Allocated Cost Decoder P Decoder Q
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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Transcribed Image Text:Terry Industries produces two electronic decoders, P and Q. Decoder P is more
sophisticated and requires more programming and testing than does Decoder Q.
Because of these product differences, the company wants to use activity-based costing
to allocate overhead costs. It has identified four activity pools. Relevant information
follows.
Activity Pools
Repair and maintenance on assembly
machine
Cost Pool Total
Cost Driver
Number of units produced
121,800
Number of programming
Programming cost
94,240
hours
Number of inspections
Number of tests
Software inspections
Product testing
7,560
11,780
$235,380
Total overhead cost
Expected activity for each product follows.
Number of
Number
Number Programming
of Units
of
Number
Inspections of Tests
Hours
Decoder
21,000
2,300
182
1,300
P
Decoder
1,500
37,000
98
1,800
Q
Total
58,000
3,800
280
3,100
Required:
a. Compute the overhead rate for each activity pool. (Round your answers to 2 decimal
places.)
Allocation Rate
Activity Pools
Decoder P
Decoder Q
Repair and maintenance on assembly
machine
Programming cost
Software inspections
Product testing
b. Determine the overhead cost allocated to each product. (Round intermed iate
calculations to 2 decimal places.)
Total Allocated Cost
Decoder P
Decoder Q
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