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Millwork Co. makes and sells two main product lines - mass produced cabinets in standard sizes, and custom cabinets each requiring design - and uses
Millwork Co. makes and sells two main product lines - mass produced cabinets in standard sizes, and custom cabinets each requiring design - and uses activity-based costing to allocate overhead. The activity cost pools are as follows: Activity Cost Pool Order processing Product design Production units Customer relations Other Expected Activity 500 orders 200 designs 10,000 machine hours 150 customers not applicable Total Cost $ 150,000 118,000 170,000 180,000 245,000 The sales manager would like to know how much overhead was allocated to cabinets for the two product lines sold to House Builds Inc. throughout the year. The sales details were as follows. a total of four orders - three orders for 12 standard cabinets per order, and one order for one custom cabinet a total of 90 machine hours - 85 for the standard cabinets and five for the custom cabinet each cabinet requires $150 in direct material and three labour hours, the direct labour rate is $18 per hour Required: 1. Calculate the activity rates. (4 marks) 2. Calculate the total overhead cost of each product line for the sales to House Builds Inc. (6 marks)
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