Question

1.

Activity Cost Pool	Activity Measure	Estimated Overhead Costs	Expected Activity
Machine Setup	Number of Setups	20,000	50
Special Processing	Machine Hours	200,000	8,000
General Factory	Direct labor Hours	250,000	12,500

Calculate the activity rate for the following:

Machine Setup: ____________

Special Processing: ____________

General Factory: ____________

2.

		Product A	Product B	Product C
Direct Labor Costs		$    40,000.00	$ 190,000.00	$ 50,000.00
Direct Materials		$ 100,000.00	$ 120,000.00	$ 60,000.00
Number of Setups		30	10	15
Machine hours		5000	2800	3000
direct labor hours		2500	11875	2000

Calculate the total costs associated with Product A, Product B, and Product C for this month’s production run:

Total Costs Product A: ____________

Total Costs Product B: ____________

Total Costs Product C: ____________

Actual manufacturing overhead for the month was $625,500. Note that all over/under applied overhead is applied to cost of goods sold at the end of the month. Answer the following questions:

Was manufacturing overhead over or under applied? ____________

What is the amount of over/under applied overhead? ____________

Answer 1

1. Activity rate = Estimated overhead costs/Expected activity

Machine Setup: $20000/50 = $400 per setup

Special Processing: $200000/8000 = $25 per machine hour

General Factory: $250000/12500 = $20 per direct labor hour

2.

	Product A	Product B	Product C
Direct labor costs	40000	190000	50000
Direct materials	100000	120000	60000
Overheads:
Machine setup	12000	4000	6000
Special processing	125000	70000	75000
General factory	50000	237500	40000
Total overheads	187000	311500	121000
Total costs	327000	621500	231000

3.

Actual manufacturing overhead	625500
Manufacturing overhead applied ($187000 + $311500 + $121000)	619500
Under-applied overhead $	6000