Question 2(Total: 30 marks)

Lojay Company produces custom covers for the air conditioning units of homes and businesses. For its overhead costs the company uses an activity-based costing system. The following data has been provided by the Lojay company regarding its annual overhead costs and its activity cost pools:

Overhead Costs:

Production overhead

$89,000

Office expenses

41,500

Total

$130,500

Distribution of Resource Consumption:

Activity Cost Pools

Making Covers

Job Support

Other

Total

Production overhead

33%

45%

22%

100%

Office expenses

14%

54%

32%

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

Making covers

2,500 yards

Job support

200 jobs

Other

Not applicable

Required:

1.Prepare the first-stage allocation of overhead costs to the activity cost pools

2.Compute the activity rates for the Making Covers and Job Support activity cost pools

3.Prepare revenue report where making 50 yards of covers and DM and DL cost of $950, and revenue is $2,500