Inspection

$42,000

# of inspections

3,500 inspections

The controller of Silky Chocolate Inc., a producer of custom-order chocolate products, is considering the adoption of the Activity-Based Costing system. The following budget for manufacturing overhead was created for 2022 after carefully reviewing the data from past years.

Currently, Silky Chocolate uses the traditional costing system and using machine hours to allocate manufacturing overhead.

Requirement 1: Determine the cost for Job 2103 by first using the traditional costing system and then the new ABC system. Fill out the job cost sheet.

Traditional Costing System
Predetermined Overhead Rate
Total budgeted overhead			$_________
Total budgeted cost driver			_________
Predetermined overhead rate			$_________
Applied Overhead
Actual machine hours used	200 machine hours
Predetermined overhead rate (from above)		$_________
Applied overhead			$_________
Job Cost Sheet for Job 2103
Direct Materials @$9.5 per pound	70 pounds used	$_________
Direct Labor @$18 per hour	30 hours used	$_________
Applied overhead (from above)		$_________
Total Job Cost		$_________

Activity	Budgeted overhead cost	Cost drivers	Budgeted activity	Activity Cost Pool Rate
Machine cost	$30,000	# of machine hours	10,000 machine hours	$____
Processing orders	$28,350	# of orders	6,750 orders	$____
Assembly	$126,400	# of units	40,000 units	$____
Setups	$17,500	# of setups	2,500 setups	$____
Engineering changes	$80,000	# of change orders	8,000 change orders	$____
Inspection	$42,000	# of inspections	3,500 inspections	$____

ABC Costing System

Job 2103

Activity	Activity level	Activity cost pool rate	Applied overhead
Machine cost	200	$____	$______
Processing orders	4	$____	$______
Assembly	1,200	$____	$______
Setups	2	$____	$______
Engineering changes	3	$____	$______
Inspection	5	$____	$______

Job Cost Sheet for Job 2103
Direct Materials @$9.5 per pound	70 pounds used	$_________
Direct Labor @$18 per hour	30 hours used	$_________
Applied overhead (from above)		$_________
Total Job Cost		$_________

Requirement 2:If the ABC system produces a more accurate picture of the real cost of each job, would Job 2103 be undercosted or overcosted under the current system that uses machine hours to allocate overhead? By what amount?