Question

The Green Company makes boats from wood. Job 489 is to build 40 rowboats. Job 489...

The Green Company makes boats from wood. Job 489 is to build 40 rowboats.

Job 489 requires 1,000 pounds of wood costing $8 per pound. It requires 60 hours of direct labor costing $25 per hour.

                                                               Total cost for all jobs        Total amount of activity for all jobs

Type of manufacturing overhead      for the whole year                      for the whole year

Setup Cost                                                        $50,000                                 400 setups

Materials Handling                                         320,000                           16,000 moves

Electricity                                                           30,000                             6,000 machine hours

                                                                          _______

Total manufacturing overhead cost

for all jobs during the whole year             $400,000

Please calculate the following if the Green Company uses activity based costing (the ABC method)::

The allocation rate for setup cost

The allocation rate for materials handling

The allocation rate for electricity

The direct materials cost of job 489

The direct labor cost of job 489

The manufacturing overhead cost applied to job 489 if job 489 requires 4 setups, 150 moves of materials, and 40 machine hours

The total cost of job 489    

The cost per boat

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Answer #1

a) allocation rate for setup cost = 50000/400 = 125 per setups

b) allocation rate for materials handling = 320000/16000 = 20 per moves

c) allocation rate for electricity = 30000/6000 = 5 per machine hour

d) The direct materials cost of job 489 = 1000*8 = $8000

e) The direct labor cost of job 489 = 60*25 = 1500

f) The manufacturing overhead cost applied to job 489 = (4*125+20*150+5*40) = 3700

g) The total cost of job 489 = (8000+1500+3700) = 13200

h) The cost per boat = (13200/40) = 330 per boat

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