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1) Calculation of plantwide overhead rate: = Total overheads / Number of direct labor hours = $450,000 / 75,000 hours = $6 per labor hour
1) Calculation of plantwide overhead rate: = Total overheads / Number of direct labor hours = $450,000 / 75,000 hours = $6 per labor hour 2) Calculation of activity rates: = Activity cost / Activity driver Set-ups = $220,000 / 6,000 set-up = $36.67 per set-up Purchasing = $80,000 / 10,000 parts = $8 per part Other overhead = $150,000 / 75,000 direct labor hours = $2 per labor hour 3) Total cost using plantwide rate: Job 1001 Job 1002 Job 1003 Balance 10/1 $44,900 $60,700 $30,500 Direct Materials $54,000 $37,000 $25,000 Direct Labor $80,000 $38,500 $43,000 Overheads @ $6 per labor hour $12,000 $14,400 $31,200 Total Cost $190,900 $150,600 $129,700 4) Total cost using activity rate: Job 1001 Job 1002 Job 1003 Balance 10/1 $44,900 $60,700 $30,500 Direct Materials $54,000 $37,000 $25,000 Direct Labor $80,000 $38,500 $43,000 $29,333 $367 $11,000 Set-up cost @ $36.67 per set-up Purchase cost @ $8 per part $2,400 $1,440 $3,200 Other Overhead cost @ $2 per labor hour $4,000 $4,800 $10,400 Total Cost $214,633 $142,507 $123,100 5.6 points) Compare the cost of each job under the two methods of applying overhead. Use the table below. Below the table provide your comments for the following points: 2. why the job costs are different between the two overhead methods b. which overhead allocation method is more accurate, and c. whether you feel that the company should move to the activity based costing system. Total job cost using OH Job 1001 Job 1002 Job 1003 method of. Single plant-wide rate Activity-based rate Comments
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