Question
I need help solving the following problem given by my instructor. I feel like i dont have enough information. Here is the problem I) ABC
I need help solving the following problem given by my instructor. I feel like i dont have enough information. Here is the problem
I) ABC problem (15 points)
Swagg Jewelry Corporation manufactures custom and semi-custom jewelry for its customers. In the past, Swagg has been using a traditional overhead allocation system based solely on direct labor hours. Semi-Custom jewelry is mass produced and uses fewer machine hours. Custom Jewelry typically requires more machine hours and more inspections to ensure quality. Sensing that this system was distorting costs and selling prices, Swagg has decided to switch to an activity-based costing system using three activity centers. Information on these activity centers for 20x7 are as follows:
Estimated level Estimated
Activity Center Cost driver for cost driver overhead cost
One Direct labor hours ? $48,000
Two Machine hours 12,500 $50,000
Three Number of inspections 1100 $22,000
During 19x7, Job #309, a Custom Jewelry job, incurred $700 of direct material, 25 hours of direct labor at $40 per hour, 80 machine hours, and 3 inspections. The total overhead cost allocated to Job # 309 under the old system would have been $300
REQUIRED:
Use the total overhead that would have been applied to Job #309 under the traditional system to calculate the Estimated Labor hours
Estimated Labor Hours
Calculate the predetermined overhead rates for the three activity centers
One :
Two :
Three :
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