Question

After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.

Activity		Cost		Driver
Setting up machinfes	$	24,030		27	batches
Inspecting components	$	4,800		4,800	parts
Providing utilities	$	9,600		4,800	machine hours

Overhead has been applied to output at a rate of 55% of direct labor costs. The following data pertain to Job 615.

Direct materials	$	2,100
Direct labor	$	3,500
Batches		5	batches
Number of parts		500	parts
Machine hours		610	machine hours

Required:
1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level.

Setting up machines
Inspecting components
Providing utilities

2. What is the total cost of Job 615 if Business Solutions applies overhead at 55% of direct labor cost?

	Total cost

3. What is the total cost of Job 615 if Business Solutions uses activity-based costing?

	Total manufacturing cost

Answer 1

ANSWER:

(1)

setting upmachines	Batch level
Inspecting components	unit level
providing utilites	Facility cost

(2)

Total cost =direct material +direct labor + overhead

        = 2100+3500+ (3500 * 55%]

        =2100 +3500 +1925

        = $ 7525

(3)

	Activity rates	OVEerhead allocated
setting machines	24030/27=890 per batch	890*5=4450
Inspecting components	4800/4800 =$ 1 per parts	1*500=500
providing utilities	9600/4800=$ 2per MH	2*610=1220
		6170

Total cost:2100+3500+6170= 11770

================

DEAR STUDENT,

IF YOU HAVE ANY QUERY PLEASE ASK ME IN THE COMMENT BOX,I AM HERE TO HELP YOU.PLEASE GIVE ME POSITIVE RATING..

****************THANK YOU******************