Question
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
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
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