Exercise 4-5 Assigning Overhead to Products in ABC [LO4-2, LO4-3]

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	$	158,800		39,700		DLHs
Purchase orders	Number of orders	$	11,605		211		orders
Parts management	Number of part types	$	90,470		109		part types
Board etching	Number of boards	$	99,000		1,980		boards
General factory	Machine-hours	$	139,300		19,900		MHs

Required:

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

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)		6,700			23,100			4,200			5,700
Purchase orders (orders)		43			36			39			93
Parts management (part types)		24			19			50			16
Board etching (boards)		590			740			650			0
General factory (MHs)		3,700			8,200			2,900			5,100

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