Question

Sultan Company uses an activity-based costing system. At the beginning of the year, the company made...

Sultan Company uses an activity-based costing system.

At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:

Activity Cost Pool Activity Measure Expected
Overhead Cost
Expected Activity
Labor-related Direct labor-hours $ 156,000 26,000 DLHs
Purchase orders Number of orders $ 11,000 220 orders
Parts management Number of part types $ 80,000 100 part types
Board etching Number of boards $ 90,000 2,000 boards
General factory Machine-hours $ 180,000 20,000 MHs

Required:

1. Compute the activity rate for each of the activity cost pools.

2. The expected activity for the year was distributed among the company’s four products as follows:

Expected Activity
Activity Cost Pool Product A Product B Product C Product D
Labor-related (DLHs) 6,000 11,000 4,000 5,000
Purchase orders (orders) 60 30 40 90
Parts management (part types) 30 15 40 15
Board etching (boards) 500 900 600 0
General factory (MHs) 3,000 8,000 3,000 6,000

Using the ABC data, determine the total amount of overhead cost assigned to each product.

Compute the activity rate for each of the activity cost pools.

  • Required 1
  • Required 2

Compute the activity rate for each of the activity cost pools.

Activity Cost Pool Activity Rate
Labor-related ------ per DLH
Purchase orders ----- per order
Parts management ----- per part type
Board etching ----- per board
General factory ------ per MH
  • Required 1
  • Required 2

Using the ABC data, determine the total amount of overhead cost assigned to each product.

Overhead Cost Assigned
Activity Cost Pool Product A Product B Product C Product D
Labor-related (DLHs) --- --- --- ---
Purchase orders (orders) ---- ---- ---- ----
Parts management (part types) ---- ---- ---- ----
Board etching (boards) ---- ---- ---- ----
General factory (MHs) ---- ---- ---- ----
Total $0 $0 $0 $0


Homework Answers

Answer #1

Compute the activity rate for each of the activity cost pools.

Activity Cost Pool Activity Rate
Labor-related 6 per DLH
Purchase orders 50 per order
Parts management 800 per part type
Board etching 45 per board
General factory 9 per MH

Using the ABC data, determine the total amount of overhead cost assigned to each product.

Overhead Cost Assigned
Activity Cost Pool Product A Product B Product C Product D
Labor-related (DLHs) 36000 66000 24000 30000
Purchase orders (orders) 3000 1500 2000 4500
Parts management (part types) 24000 12000 32000 12000
Board etching (boards) 22500 40500 27000 0
General factory (MHs) 27000 72000 27000 54000
Total 112500 192000 112000 100500
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