Martin Corporation manufactures two productsPlows and Harrows. The annual production and sales of Plows is 1,000 units, while 2,000 units of Harrows are produced and
Martin Corporation manufactures two
productsPlows
and Harrows. The annual production and sales of Plows is
1,000
units, while
2,000
units of Harrows are produced and sold. The company has traditionally used direct labour hours to allocate its overhead to products. Plows require 5.0 direct labour hours per unit, while Harrows require 2.0 direct labour hours per unit. The total estimated overhead for the period is
$603,500.
The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools.
Activity cost pool | Estimated overhead cost | Expected activity: Plows | Expected activity: Harrows | Expected activity: Total |
---|---|---|---|---|
Setups | $50,000 | 200 batches | 400 batches | 600 batches |
Machining | $337,500 | 1,700 machine hours | 1,000 machine hours | 2,700 machine hours |
Assembly | $216,000 | 5,000 direct labour hours | 4,000 direct labour hours | 9,000 direct labour hours |
Total | $603,500 |
The cost pool activity rate for Machining Costs would be closest to
Step by Step Solution
There are 3 Steps involved in it
Step: 1
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started