Question

1. Foxx Company incurs $410000 overhead costs each year in its three main departments, setup ($35000), machining ($265000), and packing ($110000). The setup department performs 40 setups per year, the machining department works 5000 hours per year, and the packing department packs 500 orders per year. Information about Foxx’s two products is as follows:

	Product A1	Product B1
Number of setups	20	20
Machining hours	1000	4000
Orders packed	150	350
Number of products manufactured	600	400

If machining hours are used as a base under traditional casting, how much overhead is assigned to Product A1 each year?

2.Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman’s overhead costs consist of setting up machines, $2240000; machining, $5350000; and inspecting, $1680000. Information on the two products is:

	Board 12	Case 165
Direct labor hours	15000	25000
Machine setups	600	400
Machine hours	24000	26000
Inspections	800	700

Overhead applied to Board 12 using traditional costing using direct labor hours is

3.Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100000 for the year.

Activity Cost Pool	Cost Driver	Est. Overhead		Cost Driver Activity
Ordering and Receiving	Orders	$   55000		500 orders
Machine Setup	Setups	238500		450 setups
Machining	Machine hours	1337500		125000 MH
Assembly	Parts	1070000		1000000 parts
Inspection	Inspections	235000		500 inspections

If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is

4.Foxx Company incurs $465000 overhead costs each year in its three main departments, setup ($25000), machining ($305000), and packing ($135000). The setup department performs 40 setups per year, the machining department works 5000 hours per year, and the packing department packs 500 orders per year. Information about Foxx’s two products is as follows:

	Product A1	Product B1
Number of setups	20	20
Machining hours	1000	4000
Orders packed	150	350
Number of products manufactured	600	400

Using ABC, how much overhead is assigned to Product A1 each year?

Answer 1

1. USing traditional costing,

Total overhead cost =$410000

total machine hours =5000hrs

Cost per hour =$82 per hour

Cost allocated to product A1 =1000hrs *$82 =$82000

2. Total overhead cost = $ (2240000+5350000+1680000) =$9270000

total direct labour hours =15000+25000 =40000

Cost per hour =$9270000/40000 =$231.75

Cost allocated to product Board 12 =15000 hours*231.75 =$$3476250

3.Total overhead cost = $ (55000+238500+1337500+1070000+235000) =$2936000

total direct labour hours =100000

Cost per hour =$2936000/100000 =$29.36

4.

Overhead	Driving factor	Total cost	Total driving units	Cost per unit	No of units of product A1	Cost allocated
Setup cost	No of set up	25000	40	625	20	12500
Machining cost	Machine hours	305000	5000	61	1000	61000
Packing cost	No of orders	135000	500	270	150	40500
Total		265000				114000