Question
Problem 6 - Traditional vs. ABC - 11 total points The following cost information is available for David, Ltd.: Activity Allocation Base Volume of Activity
Problem 6 - Traditional vs. ABC -11 total points
The following cost information is available for David, Ltd.:
Activity | Allocation Base | Volume of Activity | Overhead Cost |
Purchasing | Purchase orders | 25,000 | $200,000 |
Receiving | Shipments received | 20,000 | 100,000 |
Machine setups | Setups | 5,000 | 275,000 |
Quality control | Inspections | 30,000 | 210,000 |
Direct materials are $15 per unit for luxury handbags and $10 per unit for deluxe handbags. There were 12,000 direct labor hours. Each of which was charged to inventory at $18 per hour.
Required: 1. Calculate the overhead rate using activity-based costing.
The overhead rate for each activity is as follows:
Purchasing: |
|
Receiving: |
|
Machine setups: |
|
Quality control: |
|
Data for requirement 2: | |
One particular batch of 40 luxury handbags had the following specifications: | |
Direct labor hours | 18 |
Purchase orders | 7 |
Shipments received | 4 |
Setups | 3 |
Inspections | 10 |
- Using the data in requirement 2 and overhead rates computed in requirement 1, calculate the overhead to be allocated to the bags under the activity-based costing method.
Purchasing: |
|
Receiving: |
|
Machine setups: |
|
Quality control: |
|
Total |
|
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