Scofield Industries manufactures a variety of custom widgets. The company has traditionally used a plantwide manufacturing overhead rate based on machine hours to allocate manufacturing overhead to its products. (Click the icon to view additional information.) Expected usage and costs for manufacturing overhead activities for the upcoming year are as follows: (Click the icon to view the expected usage and costs.) During the year, Job 356 is started and completed. Usage data for this job are as follows: (Click the icon to view the usage for Job 356.) Read the requirements Requit More info Data table Begin overhead Estimated activity for the year Calcule Description of cost pool Machine maintenance costs Engineering change orders Hazardous waste disposal 17,000 The company estimates that it will incur $2,125,000 in total manufacturing overhead costs in the upcoming year and will use 17,000 machine hours. Up to this point, hazardous waste-disposal fees have been absorbed into the plantwide manufacturing overhead rate and allocated to all products as part of the manufacturing overhead process. Recently, the company has been experiencing significantly increased waste disposal fees for hazardous waste generated by certain products, and, as a result, profit margins on all products have been negatively impacted. Company management wants to implement an activity-based costing system so that managers know the cost of each product, including its hazardous waste-disposal costs. Job C JOB 3 Estimated Cost Cost driver Number of machine $ 1,380,000 hours Number of change $ 360,000 orders Pounds of hazardous $ 405,000 materials generated $ 2,125,000 4,000 1,500 Total overhead cost Total Print Done Print Requit Done Begin MH machine hours) - - More info Requirements go 1. 260 pounds of direct materials at $60 per pound 60 direct labor hours used at $50 per labor hour 120 machine hours used 2. Calculate the cost of Job 356 using the traditional plantwide manufacturing overhead rate based on machine hours. Calculate the cost of Job 356 using activity-based costing. If you were a manager, which cost estimate would provide you more useful information? How might you use this information? 3. 7 change orders 70 pounds of hazardous waste generated Print Done Print Done Requirement 1. Calculate the cost of Job 356 using the traditional plantwide manufacturing overhead rate based on machine hours. Begin by calculating the predetermined manufacturing overhead rate. First identify the formula used to compute the predetermined manufacturing overhead rate, then compute the rate. (Abbreviations used: MOH = manufacturing overhead) = Predetermined manufacturing overhead rate . Calculate the cost of Job 356. Job Cost Record Manufacturing JOB 356 Costs Total job cost Requirement 2. Calculate the cost of Job 356 using activity-based costing. Begin by calculating the allocation rate for each activity. First determine the formula to compute the allocation rate in an activity-based costing system, then compute the rate for each activity. (Abbreviations used: est. = estimated, MH=machine hours) Activity cost allocation rate Mach, maintenance per MH Eng. change orders per order Waste disposal Total actual activity allocation base = per pound Calculate the cost of J. Total actual activity cost pool Job Cost Record JOB 356 Total est. activity allocation base Total est, activity cost pool Total job cost Requirement 3. If you were a manager, which cost estimate would provide you more useful information? How might you use this information? The cost estimate based on the would provide more useful information because this cost estimate takes into account used to This information can be tivity. First determine the formula to compute the allocation rate in an activity-based costing system, then compute the rate for each activity. (Abbreviations used: est. = estimated, Direct labor Activity cost Direct materials = allocation rate + = per MH Engineering costs + per order Maintenance costs = per pound Manufacturing overhead allocated costing Waste disposal costs facturing Costs Total job cost Requirement 3. If you were a manager, which cost estimate would provide you more useful information? How might you use this information? The cost estimate based on the would provide more useful information because this cost estimate takes into account used to This information can be the machine hours used by each product. Total job cost the cost of the hazardous waste. Requirement 3. If you were a manager, which cost estimate would provide you more useful information? How might you use this information? The cost estimate based on the would provide more useful information because this cost estimate takes into account This information can be used to
