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6. Avestern, Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The company has computed a predetermined
6. Avestern, Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The company has computed a predetermined overhead allocation rate of $160 per direct labor hour. The president of Western suspects that her allocation of indirect costs could be giving misleading results, so she decides to develop an ABC system. She identifies three activities: documentation preparation, information technology support, and training. She figures that documentation costs are driven by the number of pages, information technology support costs are driven by the number of software applications used, and training costs are driven by the number of direct labor hours worked. Estimates of the costs and quantities of the allocation bases follow: 11(Click the icon to view the estimates.) Compute the predetermined overhead allocation rate for each activity. Round to the nearest dollar. Begin by selecting the formula to calculate the predetermined overhead (OH) allocation rate. Then enter the amounts to compute the allocation rate for each activity. (Round your answers to the nearest whole dollar. Abbreviation used: IT = information technology.) Predetermined OH (1) (2) allocation rate Document preparation = IT support = Training 11: Data Table Activity Estimated Cost Allocation Base $ 65,850 Pages 150,150 Applications used Estimated Quantity of Allocation Base 1,317 pages 715 applications Documentation preparation Information technology support 424,000 Direct labor hours 4,000 hours Training $ 640,000 Total indirect costs O Estimated qty of the allocation base (1) O Actual overhead costs Actual qty of the allocation base used O Estimated overhead costs O Estimated qty of the allocation base (2) O Actual overhead costs O Actual qty of the allocation base used O Estimated overhead costs
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