Question
The controller for Halifax Photographic Supply has established the following cost pools and cost drivers: Activity Cost Pool Budgeted Overhead Cost Cost Driver Budgeted Level
The controller for Halifax Photographic Supply has established the following cost pools and cost drivers:
Activity Cost Pool
Budgeted Overhead
Cost
Cost Driver
Budgeted Level for
Driver
Pool Rate
Machine setups
$200,000
Number of setups
100
$2,000 per setup
Material handling
100,000
Pounds of raw material
50,000
$2 per pound
Hazardous waste control
50,000
Pounds of hazardous chemicals
10,000
$5 per pound
Quality control
75,000
Number of inspections
1,000
$75 per inspection
Other overhead costs
200,000
Machine hours
20,000
$10 per machine hr.
Total
$625,000
An order for 1,200 boxes of film-development chemicals has the following production requirements:
Machine setups
8
Pounds of raw materials
16,000
Pounds of hazardous chemicals
None
Inspections
4
Machine hours
400
Direct materials and labor cost
$24,000
Halifax established a target price by adding a 40% markup to total manufacturing cost.
REQUIRED:
1.Determine the order's target price by using the activity-cost pools.
2. Assume that Halifax used a single, combined overhead rate based on weight of
raw materials.
a.Determine the predetermined overhead rate.
b.Determine the expected cost of the order.
c.Determine the target price.
1. Which approach above ("A" or "B") seems to be a more reasonable method to
establish target prices?Explain.
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Financial Accounting Information For Decisions
Authors: John J. Wild
10th Edition
1260705587, 978-1260705584
