Question

Durban Metal Products, Ltd., of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers. The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below: Activity Cost Pool Activity Measure Activity Rate Order size Number of direct labor-hours $ 16.85 per direct labor-hour Customer orders Number of customer orders $ 320.00 per customer order Product testing Number of testing hours $ 89.00 per testing hour Selling Number of sales calls $ 1,090.00 per sales call The managing director of the company would like information concerning the cost of a recently completed order for heavy-duty trailer axles. The order required 200 direct labor-hours, 4 hours of product testing, and 2 sales calls.

Required: What is the total overhead cost assigned to the order for heavy-duty trailer axles?

Answer 1

Activity Rate for Order Size = $16.85 per direct labor hour
Activity Rate for Customer Orders = $320.00 per customer order
Activity Rate for Product Testing = $89.00 per testing hour
Activity Rate for Selling Number of Sales Calls = $1,090.00 per sales call

Number of Order = 1
Number of Direct Labor Hours = 200
Number of Testing Hours = 4
Number of Sales Calls = 2

Total Overhead Assigned = $320.00 * 1 + $16.85 * 200 + $89.00 * 4 + $1,090.00 * 2
Total Overhead Assigned = $6,226

Therefore, total overhead cost assigned to the order for heavy-duty trailer axles.