1 Part 2 2 XYZ company manufactures chemicals used in radiological imaging systems. The company had originally used machine hours as the cost driver to develop one predetermined overhead rat 3 You have been recently hired by this company to review the costing of chemicals and realize that maybe a predetermined overhead rate does not give an accurate cost picture. 4 You remember discussing overhead cost issues in MBA641 and want to implement ABC, so you have done some research and come up with the following activity cost pools and cost drivers 5 6 Activity cost Pool 7 Material handling 8 Quality Assurance Hazardous waste 9 control 10 Other overhead costs 11 Total Budgeted overhead cost 12 Budgeted Overhead Cost Cost driver 14,000 Weight of raw materials in pounds 10,000 Number of quality checks Weight of hazardous chemical 20,000 used in pounds 130,000 Machine hours $174,000 Budgeted Level Activity for cost Driver Pool Rate 50,000 $0.28 5,000 4,000 50,000 13 Required: Make sure you show your work or use cell references for all calculations. You will not earn credit if you just type in your answer. 14 1. Using the information above calculate the single predetermined overhead rate this company is using based on machine hours as the cost driver. 15 Predetermined overhead rate: 16 17 2. If the company uses the ABC approach, what would be the pool rates for the activities you have identified above. 18 I have computed the first activity pool rate above in column E and you should compute the remainder of the rates for the other 3 activities. 19 20 3. An order for a special chemical mix has the following production requirements: 21 22 Material handling 23 Quality Assurance 24 Hazardous waste control 25 Other overhead costs 26 2000 Weight of raw materials in pounds 10 Number of quality checks 100 Weight of hazardous chemicalused in pounds 1000 Machine hours 27 If the company is using the predetermined overhead rate based on machine hours, what is the overhead cost for this order? Total Overhead cost of this order using a 28 predetermined overhead rate 29 30 If the company is using the ABC method, what is the overhead cost for this order? 31 Material handling 32 Quality Assurance 33 control 34 Other overhead costs 35 Total Overhead cost of this order using ABC