Compute activity rates and apply to jobs (Learning Objective 2)

Northstar uses ABC to account for its chrome wheel manufacturing process. Company managers have identified four manufacturing activities that incur manufac¬ turing overhead costs: materials handling, machine setup, insertion of parts, and fin¬ ishing. The budgeted activity costs for 2007 and their allocation bases are as follows:

Northstar expects to produce 1,000 chrome wheels during the year. The wheels are expected to use 3,000 parts, require 10 setups, and consume 2,000 hours of finish¬ ing time.
Job 420 used 150 parts, required 1 setup, and consumed 120 finishing hours. Job 510 used 425 parts, required 2 setups, and consumed 320 finishing hours.
Requirements 1. Compute the cost allocation rate for each activity.
2. Compute the manufacturing overhead cost that should be assigned to Job 420.
3. Compute the manufacturing overhead cost that should be assigned to Job 510.

Transcribed Image Text:

Total Budgeted Manufacturing Activity Overhead Cost Allocation Base Materials handling $ 12,000 Number of parts Machine setup 3,400 Number of setups Insertion of parts 48,000 Number of parts Finishing 80,000 Finishing direct labor hours Total $143,400