Question
After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey decides to analyze overhead cost at Business Solutions.
After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey decides to analyze overhead cost at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of the companys overhead. Additional information about overhead follows. Activity Budgeted Cost Budgeted Activity Usage Set up $ 14,000 20 setups Inspection 4,800 4,800 parts inspected Utilities 9,600 4,800 machine hours (MH) Total $ 28,400 The following data pertain to Job 615. Direct materials $ 2,600 Direct labor $ 3,100 Overhead $ _____ Setups 3 setups Parts inspected 570 parts inspected Machine hours 560 machine hours Required: 1. Classify each of the three overhead activities as unit level, batch level, product level, or facility level. 2. Assume Business Solutions allocates overhead cost using a plantwide rate based on 4,800 machine hours. Compute total product cost of Job 615. 3. Assume Business Solutions uses activity-based costing. (a) Compute overhead activity rates. (b) Allocate overhead cost to Job 615. (c) Compute total product cost of Job 615.
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