Question

DAMOOL Renovations installs oak and other hardwood floors in homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity-based costing system:

Overhead Costs:
Production Overhead	$190,000
Office Expense	$140,000
Total	$330,000

Distribution of Resource Consumption:  

	Activity Cost Pools
	Installing Floors	Job Support	Other	Total
Production overhead	40%	40%	20%	100%
Office expense	10%	60%	30%	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
Installing Floors	200 squares
Job Support	160 jobs
Other	Not applicable

A "square" is a measure of area that is roughly equivalent to 1,000 square metres.                     

Instructions

Answer only (A), (B), (C), (D), (E), (F), (G), (H) & (I)

Optional:  Calculations : ex) (( a ) x ( b )) + c - d = Answer

a) Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:       (6 marks)

	Activity Cost Pools
	Installing Floors	Job Support	Other	Total
Production overhead	( A )		38,000	190,000
Office expense
Total		( B )	80,000	( C )

b) Compute the activity rates (i.e., cost per unit of activity) for the Installing Floors and Job Support activity cost pools by filling in the table below: (6marks)

	Activity Cost Pools
	Installing Floors	Job Support
Production overhead		( D )
Office expense	70	525
Total	( E )	( F )

c) Compute the overhead cost, according to the activity-based costing system, of a job that involves installing 4.5 squares. (6 marks)

	Activity Cost Pools
	Installing Floors	Job Support	Total
Production overhead	( G )		2,185
Office expense	315		( I )
Total		( H )

Answer 1

Activity based costing uses different cost drivers to allocate activity costs

(1)

	Installing floors	Job support	Other	Total
production overhead	$76,000($190,000*40%)	$76,000($190,000*40%)	$38,000($190,000*20%)	$190,000
office expense	$14,000($140,000*10%)	$9,600($140,000*60%)	$42,000($140,000*30%)	$140,000

(2)

	Installing floors	Job support
production overhead	$380 per square($76,000/200 squares)	$475 per job($76,000/160 Jobs)
office expense	$70 per square($14,000/200 squares)	$60 per job($9,600/160jobs)

(3) 1 job 4.5 squares

	Installing floors	Job support	Other	Total
production overhead	$1,710($380 per square*4.5 squares)	$475($475*1job)	N.A	$2,185[$1,710+$475]
office expense	$315($70 PER SQUARES*4.5)	$475(475*1 job]	N.A.	$790 [$315+$475]
Total	$2,025	$950		$2,975 [$2,185+$790]