Question

Durban Metal Products, Ltd., of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers. The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below:

Activity Cost Pool	Activity Measure	Activity Rate
Order size	Number of direct labor-hours	$	16.10	per direct labor-hour
Customer orders	Number of customer orders	$	353.00	per customer order
Product testing	Number of testing hours	$	76.00	per testing hour
Selling	Number of sales calls	$	1,482.00	per sales call

The managing director of the company would like information concerning the cost of a recently completed order for heavy-duty trailer axles. The order required 170 direct labor-hours, 11 hours of product testing, and 3 sales calls.

Required:

What is the total overhead cost assigned to the order for heavy-duty trailer axles?

Activity Cost Pool	ABC Cost
Order size
Customer orders
Product testing
Selling
Total overhead cost

Answer 1

Solution:

Durban Metal Products - Overhead cost assignment

Activity Cost Pool	Activity Measure	Activity Rate
Order size	Number of direct labor-hours	$	16.10	per direct labor-hour
Customer orders	Number of customer orders	$	353.00	per customer order
Product testing	Number of testing hours	$	76.00	per testing hour
Selling	Number of sales calls	$	1,482.00	per sales call

Order for Heavy-Duty Trailer Axles

Activity cost pool	UoM	Qty	ABC Cost
Order size	direct labour hours	170	$2,737
Customer orders	no. of customer orders	1	$353
Product testing	no. of testing hours	11	$836
Selling	no. of sales calls	3	$4,446
Total Overhead Cost			$8,372