Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Planet Earth Company manufactures mini rocket ships. The company currently uses a plantwide overhead rate (traditional method) based on direct labour hours to allocate manufacturing
Planet Earth Company manufactures mini rocket ships. The company currently uses a plantwide overhead rate (traditional method) based on direct labour hours to allocate manufacturing overhead to individual jobs. It estimates to incur 100,000 direct labour hours this year and expects manufacturing overhead to be $3,900,000. However, the owner and CEO is considering using activity-based costing to allocate manufacturing overhead. She has identified four activities that incur or drive manufacturing costs: inspections, material handling, set-ups and engineering designs. The budgeted activity costs for the upcoming year and the allocation bases are as follows: Activity Allocation base Budgeted manufacturing overhead costs Estimated volume of allocation base Inspections $800,000 # inspections 100 inspections Material handling $500,000 # moves 250 moves Set-ups $600,000 # set-ups 20 set ups Engineering designs $2,000,000# engineering hours 50,000 engineering hours Job #007 Apollo - used 20 inspections, 50 moves, 5 set ups, 10,000 engineering hours and 30,000 direct labour hours Job # 510 Mars - used 25 inspections, 65 moves, 12 set ups, 15,000 engineering hours and 35,000 direct labour hours. Required: 1. Using the traditional method of cost allocation determine the manufacturing overhead that will be allocated to Job #007 Apollo and Job #510 Mars. (6 marks) 2. Using activity based costing compute the activity rate for each activity. (4 marks) 3. Using activity based costing compute the manufacturing overhead costs that will be allocated to Job #007 - Apollo. (4 marks) 4. Using activity based costing compute the manufacturing overhead costs that will be allocated to Job # 510 -Mars. (4 marks) ENTER YOUR ANSWER IN THE WHITE SPACE BELOW SHOW ALL YOUR CALCULATIONS IN ORDER TO RECEIVE PART MARKS
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
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