Exercise 3-5 Assigning Overhead to Products in ABC [LO3-2, LO3-3]

Sultan Company uses an activity-based costing system.

At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:

Activity Cost Pool	Activity Measure	Expected Overhead Cost		Expected Activity
Labor-related	Direct labor-hours	$	284,000	35,500	DLHs
Purchase orders	Number of orders	$	6,790	194	orders
Parts management	Number of part types	$	71,340	82	part types
Board etching	Number of boards	$	57,900	1,930	boards
General factory	Machine-hours	$	229,900	20,900	MHs

Required:
1.	Compute the activity rate for each of the activity cost pools.

Activity Cost Pool	Activity Rate
Labor-related		per DLH
Purchase orders		per order
Parts management		per part type
Board etching		per board
General factory		per MH

2.	The expected activity for the year was distributed among the companys four products as follows:

	Expected Activity
Activity Cost Pool	Product A	Product B	Product C	Product D
Labor-related (DLHs)	3,000	22,800	3,900	5,800
Purchase orders (orders)	43	20	48	83
Parts management (part types)	22	15	32	13
Board etching (boards)	530	750	650	0
General factory (MHs)	3,600	7,300	3,900	6,100

Using the ABC data, determine the total amount of overhead cost assigned to each product.

	Overhead Cost Assigned
Activity Cost Pool	Product A	Product B	Product C	Product D
Labor-related (DLHs)
Purchase orders (orders)
Parts management (part types)
Board etching (boards)
General factory (MHs)
Total	$0	$0	$0	$0