Question
Franklin Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because
Franklin Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows:
| Activity Pools | Cost Pool Total | Cost Driver | ||
| Repair and maintenance on assembly machine | $ | 69,600 | Number of units produced | |
| Programming cost | 100,860 | Number of programming hours | ||
| Software inspections | 5,000 | Number of inspections | ||
| Product testing | 11,220 | Number of tests | ||
| Total overhead cost | $ | 186,680 | ||
| | ||||
Expected activity for each product follows:
| Number of Units | Number of Programming Hours | Number of Inspections | Number of Tests | |||||||||
| Decoder P | 22,000 | 1,600 | 190 | 1,600 | ||||||||
| Decoder Q | 36,000 | 2,500 | 60 | 1,700 | ||||||||
| Total | 58,000 | 4,100 | 250 | 3,300 | ||||||||
| | ||||||||||||
Required
-
Compute the overhead rate for each activity pool.
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Determine the overhead cost allocated to each product.
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Intermediate Accounting
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones
11th edition
978-0538467087, 9781111781262, 538467088, 1111781265, 978-0324659139
