Question
Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records. Production Activity Indirect
Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.
Production Activity | Indirect Labor | Indirect Materials | Other Overhead | ||||||||
Grinding | $ | 340,000 | |||||||||
Polishing | $ | 135,000 | |||||||||
Product modification | 450,000 | ||||||||||
Providing power | $ | 235,000 | |||||||||
System calibration | 420,000 | ||||||||||
Additional information on the drivers for its production activities follows.
Grinding | 17,000 | machine hours |
Polishing | 17,000 | machine hours |
Product modification | 2,000 | engineering hours |
Providing power | 19,000 | direct labor hours |
System calibration | 800 | batches |
Job 3175 | Job 4286 | |||
Number of units | 160 | units | 2,000 | units |
Machine hours | 400 | MH | 4,000 | MH |
Engineering hours | 28 | eng. hours | 22 | eng. hours |
Batches | 10 | batches | 30 | batches |
Direct labor hours | 500 | DLH | 4,500 | DLH |
Required: 2, 3 & 4. Compute the activity overhead rates using ABC. Combine the grinding and polishing activities into a single cost pool. Determine overhead costs to assign to the above jobs using ABC. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286? (Round your activity rate and average overhead cost per unit to 2 decimal places. Round "overhead assigned" to the nearest whole dollar.)
Activity Overhead Cost Activity Drivers Activity Rate Grinding & Polishing $ 475,000 17,000 Machine hours 27.94 per machine hour Product modification 450,000 2,000 Engineering hrs. 225.00 per engineering hour Providing power 235,000 19,000 Direct labor hrs. 12.37 per direct labor hour System calibration 420,000 800 batches 525.00 per batch Job 3175 Activity driver incurred Overhead assigned Job 4286 Activity Overhead driver incurred assigned 4,000 $ 111,760 400 11,176 28 6,300 22 4,950 500 6,185 4,500 55,665 10 30 5,250 28,911 Total overhead cost $ 15,750 188,125 2,000 160 Number of units in job Average overhead cost per unit 290.44 x $ 209.12 X Required: 5. If the company uses a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286? (Do not round intermediate calculations. Round "OH Cost per unit" answers to 2 decimal places.) X Answer is complete but not entirely correct. Overhead costs 92.94 per direct labor hour 1,580,000 17,000 Direct labor hours Product DL hours Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit 290.44 Job 3175 500 92.94 $ 46,470 160 Job 4286 4,500 $ 92.94 $ 418,230 2,000 209.12 xStep by Step Solution
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