Question

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs...

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity Indirect Labor Indirect Materials Other Overhead
Grinding $ 320,000
Polishing $ 195,000
Product modification 400,000
Providing power $ 210,000
System calibration 480,000


Additional information on the drivers for its production activities follows.

Grinding 16,000 machine hours
Polishing 16,000 machine hours
Product modification 2,100 engineering hours
Providing power 20,000 direct labor hours
System calibration 1,500 batches
Job 3175 Job 4286
Number of units 220 units 2,750 units
Machine hours 300 MH 3,000 MH
Engineering hours 32 eng. hours 20 eng. hours
Batches 15 batches 45 batches
Direct labor hours 460 DLH 4,140 DLH

Compute the activity overhead rates using ABC. Combine the grinding and polishing activities into a single cost pool. Determine overhead costs to assign to the above jobs using ABC. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286? (Round your activity rate and average overhead cost per unit to 2 decimal places. Round "overhead assigned" to the nearest whole dollar.)

Job 3175 Job 4286
Activity Overhead Cost Activity Drivers Activity Rate Activity driver incurred Overhead assigned Activity driver incurred Overhead assigned
Grinding & Polishing Machine hours
Product modification Engineering hrs.
Providing power Direct labor hrs.
System calibration batches

Homework Answers

Answer #1
Job 3175 Job 4286
Activity Overhead Cost Activity Drivers Activity Rate Activity driver incurred Overhead assigned Activity driver incurred Overhead assigned
Grinding & Polishing 515000 16000 Machine hours 32.19 per MH 300 9656.25 3000 96562.5
Product modification 400000 2100 Engineering hrs. 190.48 per Eng hrs 32 6095.24 20 3809.52
Providing power 210000 20000 Direct labor hrs. 10.5 per DLH 460 4830 4140 43470
System calibration 480000 1500 batches 320 per batch 15 4800 45 14400
Total 25381.49 158242.02
Number of units 220 2750
Average overhead cost per unit 115.37 57.54
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