Question

# After reading an article about activity-based costing in a trade journal for the furniture industry, Santana...

 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

(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,

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

#### Earn Coins

Coins can be redeemed for fabulous gifts.