Problem 36 (Chapter 3) of the textbook: Computing Product Costs Using ActivityBased Costing: Petrov Company Identified the following activities, estimated costs for each activity, and
Problem 36 (Chapter 3) of the textbook: Computing Product Costs Using ActivityBased Costing: Petrov Company Identified the following activities, estimated costs for each activity, and identified cost drivers for each activity for this coming year. (These are the first three steps of the activitybased costing model). Activity Cost Driver Estimated Estimated Annual Cost Annual Driver Activity Overhead Costs Production setup Number of $ 60,000 100 production runs production runs Materials handling ' 140,000 10,000 yards purchased Quality control 80,000 800 inspections inspections The company produces two products, MX'I and MX2. Information about these products of the month of March follows: Direct labor costs per unit $15 $45 Actual cost driver activity levels for the month of March are as follows: - Yards of materials purchased 550 230 Required: a. Using the estimates for the year, compute the predetermined overhead rate for each activity (this is step 4 of the activitybased costing process). b. Using the activity rates calculated in requirement a and the actual cost driver activity levels shown for March, allocate overhead to the three products for the month of March (this is step 5 of the activity based costing process). Template for part (a) Activity Cost Driver Estimated Estimated Pre-determined Overhead Cost Driver Overhead Rate Costs Activity Production $[ per setups production run Materials ' $[ per yard handng Template for part (b) MX1 MX2 Pre-determined Cost Driver Overhead Cost Driver Overhead Activity Allocated Activity Allocated Overhead Rate $L _] per $ L production run $ per yard $ L $ L purchased $L _] per $ L_ inspection Total allocated
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