Question
Hansen Company uses activity-based costing. The factory overhead budget for the coming period is $1,053,000, consisting of the following: Cost Pool Budgeted Amount Supervision $320,000
Hansen Company uses activity-based costing. The factory overhead budget for the coming period is $1,053,000, consisting of the following:
Cost Pool | Budgeted Amount |
Supervision | $320,000 |
Machine usage | 420,000 |
Machine setups | 187,000 |
Design changes | 126,000 |
Totals | $1,053,000 |
The potential allocation bases and their estimated amounts were as follows:
Allocation Base | Budgeted Amount |
Number of design changes | 35 |
Number of setups | 110 |
Machine hours | 6,000 |
Direct labor hours | 10,000 |
a. Determine the overhead rate for each cost pool, using the most appropriate allocation base for each pool.
Cost Pool | Budgeted Amount |
Divided by |
| Overhead Rate |
| A | B |
| A/B |
Supervision | 320,000 | 10,000 | Direct labor hours | 32 |
Machine usage | 420,000 | 6,000 | Machine hours | 70 |
Machine setups | 187,000 | 110 | Number of setups | 1,700 |
Design changes | 126,000 | 35 | Number of design changes | 3,600 |
Totals | 1,053,000 |
|
|
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b. Job 80130 required $45,000 for direct materials, $20,000 for direct labor, 2,000 direct labor hours, 800 machine hours, five setups and four design changes. Determine the cost of Job 80130.
c. Determine the cost of Job 80130 if Hansen used the direct labor hour method of applying overhead.
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