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Answer the following questions using the information below: Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for

Answer the following questions using the information below:

Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:

Cost Pool

Overhead Costs

Cost driver

Activity level

Supervision of direct labour

$320,000

Direct labour hours

800,000

Machine maintenance

$120,000

Machine hours

960,000

Facility rent

$200,000

Square metres of area

100,000

Total overhead costs

$640,000

The accounting records show the Mossman Job consumed the following resources:

Cost driver

Actual level

Direct labour-hours

200

Machine-hours

1,600

Square metres of area

50

Required:

  1. If Gregory Enterprises uses a simple cost system based on direct labour hours then what amount of indirect costs will be allocated to the Mossman job?

Answer-

  1. What is the activity rate for machine maintenance costs?

Answer-

  1. If Gregory Enterprises uses an ABC system then what amount of indirect costs will be allocated to the Mossman job?

Answer-

  1. When selling prices are based on costs assigned using the single cost driver, direct labour hours, then would the Mossman job be overbilled or underbilled

Answer-

  1. What are the benefits of ABC

Answer-

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