Question
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its
Sultan Company uses an activity-based costing system.
At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:
Activity Cost Pool | Activity Measure | Expected Overhead Cost | Expected Activity | ||||
Labor-related | Direct labor-hours | $ | 317,600 | 39,700 | DLHs | ||
Purchase orders | Number of orders | $ | 9,900 | 220 | orders | ||
Parts management | Number of part types | $ | 67,890 | 93 | part types | ||
Board etching | Number of boards | $ | 76,000 | 1,900 | boards | ||
General factory | Machine-hours | $ | 237,600 | 21,600 | MHs | ||
Required:
1. Compute the activity rate for each of the activity cost pools.
2. The expected activity for the year was distributed among the companys four products as follows:
Expected Activity | ||||||||||||
Activity Cost Pool | Product A | Product B | Product C | Product D | ||||||||
Labor-related (DLHs) | 6,300 | 23,700 | 4,600 | 5,100 | ||||||||
Purchase orders (orders) | 70 | 27 | 40 | 83 | ||||||||
Parts management (part types) | 28 | 13 | 32 | 20 | ||||||||
Board etching (boards) | 580 | 700 | 620 | 0 | ||||||||
General factory (MHs) | 3,900 | 8,900 | 3,500 | 5,300 | ||||||||
Using the ABC data, determine the total amount of overhead cost assigned to each product.
1. Compute the activity rate for each of the activity cost pools.
Activity Cost Pool | Activity Rate | |
Labor-related | per DLH | |
Purchase Orders | per order | |
Parts Management | per part type | |
Board etching | per board | |
General Factory | per MH |
2. Using the ABC data, determine the total amount of overhead cost assigned to each product.
Overhead Cost Assigned | ||||
Activity Cost Pool | Product A | Product B | Product C | Product D |
Labor-related (DLHs) | ||||
Purchase Orders (orders) | ||||
Parts Management (part types) | ||||
Board Etching (boards) | ||||
General Factory (MHs) | ||||
Total |
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