The controller of G'Day Chemical Supply of South Australia has established the following activity centers with over- head costs (in Australian dollars) and related cost drivers:

Transcribed Image Text:

Activity Centers Materials Handling. Machine Setups Budgeted Overhead Costs A$120,000 240,000 Cost Driver Weight of raw materials Number of setups Budgeted Level for Cost Driver 60,000 pounds 120 setups 12,000 pounds Hazardous Waste Quality Control. Other. 60,000 Weight of hazardous materials 85,000 205,000 Number of inspections Machine hours 1,000 inspections 102,500 hours An order for 1,000 boxes of a powdered chemical has the following produc- tion requirements: Required: Raw materials (in pounds). Machine setups Hazardous materials (in pounds) Inspections Machine hours 1. Compute the overhead rates for each activity center. 10,500 5 1,850 13 490 2. Using the rates determined in Part (1), charge overhead costs to the order for 1,000 boxes of powdered chemical. 3. Calculate the cost per box of powdered chemical. 4. Assume the company allocates overhead costs on a plant-wide basis using machine hours. (a) Compute the plant-wide overhead rate. (b) Charge overhead costs to the order for 1,000 boxes of powdered chemical. (c) Calculate the cost per box of powdered chemical. 5. Explain why the cost per box differs under the two methods.