Humpty Doo Production Systems Pty Ltd make designer kitchen furniture for the Top End home market. There
Question:
Humpty Doo Production Systems Pty Ltd make designer kitchen furniture for the Top End home market. There are two types of product, the Family Suite, and the upmarket Designer Suite. In September 2023 420 Family Suites were made and 105 Designer Suites were created which incurred indirect production overhead costs of $119,700.
A breakdown of the indirect production costs is shown below:
Activity Cost driver Total cost
Materials handling Number of requisition orders $40,950
Machine set-ups Number of machine set-ups 44,100
Quality inspections Number of quality inspections 34,650
Total $119,700
1,050 735 990
Total
The cost driver volume for the two products is shown below:
Cost driver Family Suite Designer Suite
Number of requisition orders 840 210
Number of machine set-ups 420 315
Number of quality inspections. 570 420
Required
a) Calculate the indirect activity cost rate for each activity using the total amount of each cost driver.
b) Allocate the indirect production overhead costs for September to the products using the activity cost rates calculated in (a).
Expert Answer:
a To calculate the indirect activity cost rate for each activity we divide the total cost of each ac... View the full answer
