Question

# Texas Co. established the following overhead cost pools and cost drivers: Budgeted Estimated Overhead Cost Pool...

Texas Co. established the following overhead cost pools and cost drivers:

 Budgeted Estimated Overhead Cost Pool Overhead Cost Driver Cost Driver Level Quality controls \$780,000 # of inspections 26,000 inspections Machine setups \$720,000 # of setups 12,000 setups Other overhead costs \$900,000 # of machine hrs 50,000 machine hrs Total overhead costs \$2,400,000 A recent order for sailboats used: Quality inspections 750 inspections Machine setups 500 setups Machine hours (MHs) 2,400 machine hours

Required:

a. What is the overhead rate per machine hour if the number of machine hours (MHs) is used as a single cost driver under traditional costing system?

b. Utilizing traditional costing, how much overhead is assigned to the order based on machine hours as a single cost driver?

c. Utilizing ABC, how much total overhead is assigned to the order?

 Req 1. Total Overheads cost 24,00,000 Divide: Total MH 50,000 OH rate per MH 48 per MH Req 2. MH used in the order 2400 Multiply: OH rate per MH 48 Overheads applied 115200 Req 3. Overheads applied as per Activity based costing Activity Total OH Driver Rate Driver used in Job OH applied Quality control 780000 26000 30 750 22500 Mchine setup 720000 12000 60 500 30000 Other overheads 900000 50000 18 2400 43200 Total OH applied as per ABC 95700

#### Earn Coins

Coins can be redeemed for fabulous gifts.