Machining

Finishing

Department

Department

Manufacturing overhead incurred

$13,440,000

$9,480,000

Direct Manufacturing Labor Cost

$1,140,000

$4,920,000

Machine-hours

220,000

32,000

a)Compute the under or over allocated manufacturing overhead for each department.

Schedule of Cost of Goods Sold (11 marks)

Logan Products, a small manufacturer, has submitted the items below concerning last year's operations (presented in alphabetical order).

Administrative salaries

$ 2,400

Finished goods inventory, ending

$44,410

Advertising expense

$ 1,200

Indirect labour cost

$11,800

Depreciation - factory building

$800

Insurance on factory

$1,400

Depreciation - factory equipment

$ 1,600

Purchases of direct material

$14,600

Depreciation - office equipment

$180

Repairs & maintenance-factory

$900

Direct labour cost

$21,900

Sales salaries

$2,000

Direct material inventory, beginning

$ 2,100

Taxes on factory

$450

Direct materials inventory, ending

$ 3,200

Work-in-process inventory, beginning

$1,670

Finished goods inventory, beginning

$46,980

Work-in-process inventory, ending

$1,110

REQUIRED:

Prepare a Schedule of Cost of Goods Sold in good form.

Activity Based Costing (7 marks)

Kramer Corporation is an office supplier dealing in a number of different products.It currently allocates ordering and delivery costs to its residential and business customer groups on the basis of order value.However, the company has recently decided to implement activity-based costing starting in 2021 to assign these costs to customers.Key data for 2020 are as follows:

Activity

ActivityResidential Business Total for all

Cost

BaseCustomersCustomers Customers

Sales in $

$3,600,000$3,000,000$6,600,000

Order Costs

$2,500,000

# of orders 12,000 8,00020,000

Delivery Costs

$1,500,000

# of deliveries6,0004,00010,000

Total Costs$4,000,000

Kramer currently has 3,000 residential customers and 750 business customers.

REQUIRED:

1.Computer the cost per customer for residential and business customers for 2020 using the current system of cost allocation.

2.Assume that the 2020 data will be the same for 2021.Calculate the cost per customer for residential and business customers for 2021, using the proposed activity-based system of cost allocation.Calculate the overhead allocation rate for each activity, and use these rates to assign costs to the two customer groups.