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Required a. Compute the amount of overhead cost allocated to each type of decoder when using direct labor hours as the allocation base. b. Determine
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a. Compute the amount of overhead cost allocated to each type of decoder when using direct labor hours as the allocation base.
b. Determine the cost per unit for overhead when using direct labor hours as the allocation base and when using ABC.
Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. lt has identified four activity pools. Relevant information follows Cost Pool Total 99,000 Number of units produced Activity Pools Repair and maintenance on assembly machine Programming cost Software inspections Product testing Total overhead cost Cost Driver 167,000 Number of programming hours 21,000 Number of inspections 25,000 Number of tests $312,000 Expected activity for each product follows Number of Number of Inspections 266 84 350 Number of Programming Decoder P Decoder Q Total Units 19,800 46,200 66,000 Hours 2,700 2,300 5,000 Number of Tests 1,400 1,100 2,500 Assume that before shifting to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours Direct labor data pertaining to the two decoders follow: Decoder P Decoder Q Total Direct Labor Hours 7,200 16,800 24,000Step by Step Solution
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