Texas Co. established the following overhead cost pools and cost drivers:
|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:|
|Machine hours (MHs)||2,400||machine hours|
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?
|Total Overheads cost||24,00,000|
|Divide: Total MH||50,000|
|OH rate per MH||48||per MH|
|MH used in the order||2400|
|Multiply: OH rate per MH||48|
|Overheads applied as per Activity based costing|
|Activity||Total OH||Driver||Rate||Driver used in Job||OH applied|
|Total OH applied as per ABC||95700|
Get Answers For Free
Most questions answered within 1 hours.