Question

A firm called The Company of Fools budgets the following overhead costs.

	Budgeted cost
Administration	$500,000
Shop Supplies	$300,000
Machinery	$200,000

This firm uses activity-based costing, with the following percentage table to develop activity cost pools.

Activity Cost Pool	Molding	Remolding	Re-Remolding	Other
Administration	10%	20%	20%	50%
Shop Supplies	40%	40%	20%	0%
Machinery	20%	30%	30%	20%

In The Company of Fools, they budget the following activity drivers for activity cost pools.

Activity Cost Pool	Molding	Remolding	Re-Remolding	Other
Budgeted activity driver	10,000	16,000	5,000	n/a

The Necio Job consumes $500 in direct costs, 3 units of the Molding activity driver, 5 units of the Re-molding activity driver and 10 units of the Re-Remolding activity driver.

What is the total job cost for the Necio job?

Answer 1

Computation of Total cost for Job
Direct Cost	500
Activity Cost
Molding ( 3 X 17.40)	52.2
Remolding ( 5 X 14.13)	70.65
Re Remolding ( 10X33.20	332
Total Cost	954.85

Allocation of Cost Activity Wise and Activity Rate: The Company Foods
		Molding		Remolding		Re-Remolding		Other
Activity Cost Pool	Estimated Cost	%	Amount	%	Amount	%	Amount	%	Amount
Administration	$500,000.00	10%	$50,000.00	20%	$100,000.00	20%	$100,000.00	50%	$250,000.00
Shop Supplies	$300,000.00	40%	$120,000.00	40%	$120,000.00	20%	$60,000.00	0%	$0.00
Machinery	$20,000.00	20%	$4,000.00	30%	$6,000.00	30%	$6,000.00	20%	$4,000.00
Total	$820,000.00		$174,000.00		$226,000.00		$166,000.00		$254,000.00
No of Activity			10000		16000		5000
Cost Per Activity			$17.40		$14.13		$33.20