Question

PROBLEM 1: GF Corporation manufactures two products: Product 16S and Product 17K. The company is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to three cost pools. The following additional information is available for the company as a whole and for Products E16S and P17K.

	Activity Cost Pool		Activity Measure		Total Cost			Total Activity
Machining		Machine-hours		$		220,000	11,000		MHs
Machine setups		Number of setups		$		240,000	400		setups
General factory		Direct labor-hours		$		270,000	10,000		DLHs

Activity Measure	Product 16S	Product 17K
Machine-hours	7,000	4,000
Number of setups	270	130
Direct labor-hours	3,000	7,000

1. What is the overhead rate for each activity cost pool?   
   
   

Machining             ______ per machine hour

    

Machine setups      ______ per setup

General factory     ______ per direct labor hour

2. What is the total overhead costs charged to Product 16S? $ __________________________

Show your work in the open space above or below:

CIRCLE THE CORRECT ANSWER FOR EACH QUESTION BELOW:

3. What step is assigning the total costs to each activity cost pool? STEP 2       STEP 3      STEP 4      STEP 5
   
4. What step is computing the rates in a above?                                STEP 2       STEP 3      STEP 4     STEP 5
   
5. What step is assigning overhead costs to Product 16S?                STEP 2       STEP 3       STEP 4     STEP 5

Answer 1

Answer A - Calculation of Activity rate
	Total Cost /	Allocation base=	Predetermined OH allocation rate
Machining	220000	11000	20	per MH
Machine setups	240000	400	600	per Setup
General factory	270000	10000	27	per DLHs
Total	730000
Cost Assigned	Activity Driver	Activity Rate	Total OH cost
Product 16S
Machining	7000	20	140000
Machine setups	270	600	162000
General factory	3000	27	81000
Total Activity costs			383000	Answer B
Product 17K
Machining	4000	20	80000
Machine setups	130	600	78000
General factory	7000	27	189000
Total Activity costs			347000
Answer C - Step 2
Answer D - Step 3
Answer E - Step 4