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After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically
After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows. Activity Setting up machines Cost $17,250 Inspecting components $ 4,700 $9,400 Providing utilities Driver 23 batches 4,700 parts 4,700 machine hours Overhead has been applied to output at a rate of 40% of direct labor costs. The following data pertain to Job 615 Direct materials Direct labor Batches Number of parts Machine hours $2,200 $4,000 6 batches 510 parts 670 machine hours Required: 1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level. Setting up machines Inspecting components Providing utilities 2. What is the total cost of Job 615 if Business Solutions applies overhead at 40% of direct labor cost?
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