Question
Perfect Flooring installs oak and other hardwood floors in homes and businesses. The company uses an activity-based costing system for its overhead costs. The company
Perfect Flooring installs oak and other hardwood floors in homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity-based costing system:
Overhead Costs: | |
Production overhead | $190,000 |
Office expense | 140,000 |
Total | $330,000 |
Distribution of resource consumption:
Activity Cost Pools | ||||
Installing Floors | Job Support | Other | Total | |
Production overhead | 40% | 40% | 20% | 100% |
Office expenses | 10% | 60% | 30% | 100% |
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows:
Activity Cost Pool | Annual Activity |
Installing floors | 200 squares |
Job support | 160 jobs |
Other | Not applicable |
A "square" is a measure of area that is roughly equivalent to 1,000 square metres. Required:
- Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:
Installing Floors | Job Support | Other | Total | |
Production overhead | ||||
Office expense | ||||
Total |
- Compute the activity rates (i.e., cost per unit of activity) for the Installing Floors and Job Support activity cost pools by filling in the table below:
Installing Floors | Job Support | |
Production overhead | ||
Office expense | ||
Total |
- Compute the overhead cost, according to the activity-based costing system, of a job that involves installing 3.4 squares.
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