Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Following a review of its operational processes, Hedman Company has identified the following overhead activities costs and activity drivers for the upcoming year: Activity Expected

Following a review of its operational processes, Hedman Company has identified the following overhead activities costs and activity drivers for the upcoming year:

Activity

Expected cost

Activity Driver

Estimated Activity Level

Setting up

$140,000

Number of setups

700 setups

Inspecting

$100,000

Inspection hours

10,000 hours

Polishing

$190,000

Machine hours

38,000 hours

Receiving

?

Number of parts

100,000 parts

The company produces several different couplings that it sells throughout North America. The following is information on two separate batches of the companys couplings:

Sleeve Couplings

Disc Couplings

Direct Materials

$1,900

$2,000

Direct Labour

$1,200

$1,200

Units Completed

200

100

Number of setups

2

2

Inspection hours

8

4

Machine hours

40

60

Parts used

40

80

The company's normal activity is 20,000 direct labour hours. Each batch uses 100 hours of direct labour.

Upon investigation, you discover that Receiving employs a worker, who spends 75% of her time on the receiving activity and 25% of her time on inspecting products. Her annual salary is $80,000. In addition, Receiving also uses a forklift, at a cost of $12,000 per year for fuel and maintenance. The forklift is used only in receiving.

Required: a. Compute the unit cost for Sleeve Couplings, using direct labour hours to assign overhead.

b. Compute the unit cost for Sleeve Couplings, using activity rates.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Best Practices

Authors: Steven M. Bragg

3rd Edition

0471444286, 978-0471444282

More Books

Students also viewed these Accounting questions

Question

Let x R. a) Prove that |x| Answered: 1 week ago

Answered: 1 week ago

Question

Explain the various ways to protect employees.

Answered: 1 week ago