PRACTICE QUESTIONS

Question 1

McNish Enterprise manufactures and sells two products, Standard and Premium. The company uses the activity-based costing system to allocate its overhead costs. The following information has been collected relating to the SIX (6) overhead activities:

Cost

Activity

$400 500

Purchase Orders

5275 000

Quality Control

$150 000

Material Handling

550 000

Setup Cost

Production Scheduling

$125 000

$240 000

Procurement

51 240 500

The activity-based usage quantities for each product are as follows:

Setups

Number of

Orders

Number of Orders

Executed

Number of

Inspection

750

Standard

300

900

500

1 250

500

Premium

200

1 600

Total

500

2 500

2 000

1 000

The company produces 2 500 units of Standard and 2 000 units of Premium

Number of

Production Use

450

350

800

Required:

(i) Calculate the activity rate for each activity.

(ii Calculate the total overhead cost assigned to each product