Question
Alexander Custom Furniture has five indirect-cost pools (purchasing, material handling, machine maintenance, product inspection and packaging). The company is in the process of bidding on
Alexander Custom Furniture has five indirect-cost pools (purchasing, material handling, machine maintenance, product inspection and packaging). The company is in the process of bidding on two jobs:
1)Job 0802: an order of 15 intricate personalised furniture.
2)Job 2408: an order of 6 standard personalised furniture.
The controller wants you to compare overhead allocated under the simple job-costing system and newly designed activity-based job-costing system. Total budgeted costs in each indirect-cost pool and the budgeted quantity of activity driver are as follows:
Budgeted Overhead
ActivityDriver
Budgeted Quantity of Activity Driver
Purchasing
$70,000
Purchase orders processed
4,000
Material handling
$87,500
Material moves
10,000
Machine maintenance
$237,300
Machine-hours
21,000
Product inspection
$18,900
Inspections
3,780
Packaging
$39,900
Units produced
7,980
$453,600
Information related to Job 0802 and Job 2408 follows. Job 0802 incurs more batch-level costs because it uses more types of materials that need to be purchased, moved and inspected relative to Job 2408.
Job 0802
Job 2408
Number of purchase orders
25
8
Number of material moves
10
4
Machine-hours
40
60
Number of inspections
9
3
Units produced
15
6
REQUIRED:
A)Determine the overhead rate and thetotal amount of overhead costs allocated to Job 0802 under a simple costing system, where overhead is allocated based on machine-hours.(4 marks)
B)Determine the overhead rate and thetotal amount of overhead costs allocated to Job 2408 under an activity-based costing system using the appropriate activity drivers.(11 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started