Question

For its inspecting cost pool, Ellsworth, Inc. expected overhead cost of $200000 and 4000 inspections. The actual overhead cost for that cost pool was $280000 for 5000 inspections. The activity-based overhead rate used to assign the costs of the inspecting cost pool to products is

$40 per inspection.

$56 per inspection.

$50 per inspection.

$70 per inspection.

Hartley Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20000 units annually. Planter is a low-volume item totaling only 6000 units per year. Flower requires 1 hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32000 (20000 + 12000). Expected annual manufacturing overhead costs are $680000. Hartley uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of

$21.25.

$26.15.

$42.50.

need more information to compute.

Answer 1

1)

Expected Overhead = $200,000

expected inspections = 4,000

Predetermined overhead rate = $200,000 / 4,000 = $50

The activity-based overhead rate used to assign the costs of the inspecting cost pool to products is $50.

2)

1 unit of Flower requires = 1 hour of direct labor

1 unit of Planter requires = 2 hours of direct labor

Total annual direct labor hours = 32,000

predetermined Overhead cost = $680,000 / 32,000 = $21.25 per direct labor hour

Each unit of Planter requires = 2 hours of direct labor

Overhead assigned to one unit of Planter = 2 hours * $21.25 = $42.50

So, Each unit of Planter would be assigned overhead of $42.50