Question

Super Speaker company makes two different grades of speakers for use with mobile devises, a Premium...

Super Speaker company makes two different grades of speakers for use with mobile devises, a Premium and a Standard. They have decided to implement an ABC system for analyzing the costs of the two different lines. After a cost study, the accounting team at Super Speaker came up with the following information:

Activity

 Cost Allocation Base
Setups $52030

Number of Setups
Machine Maintenance $36551 Number of machine hours

Estimated amount of allocation base equaled actual amount during the period.

Standard Premium       Total
Direct Labor Hours 1855 2244 4099
Number of Setups 44 56 100
Number of Machine Hours 1741 1130 2871

Required: Compute the amount of indirect cost applied to the Premium speakers.

Business   Accounting   
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Answer #1
Computation of the overhead rate under ABC (Total indirect cost applied to be applied)
A B C D E F= D+E G = C/F H = D x G I = E x G
Consupmtion of Cost Driver Overhead under ABC
Activity Cost Driver Cost Standard Premium Total Activity Cost per Activity Standard Premium
Setups Number of Setups 52030.00 44.00 56.00 100 520.30 22893.20 29136.80
Machine Maintenance Number of Machine Hours 36551.00 1741.00 1130.00 2871 12.73 22164.85 14386.15
Total indirect cost applied to be applied 88581 45058.05 43522.95
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