The following are the four activities and the total cost pools of each which were gathered after a series of interviews and observations made by the team set up by the accounting department to change the traditional way of determining applied factory overhead for Printrite Inc.:       ACTIVITIES COST POOLS COST DRIVER OH RATE Machine Setups $ 25,000     Design Changes 15,000     Machining Support 80,000     Assembly Support 50,000       The following cost drivers were chosen as most appropriate for the above activities:   Direct labor cost                       $75,000  Number of setups     200             Number of machine hours 2,000 Number of design hours           500            REQUIRED:  Match the activities to the cost drivers and compute the overhead rate per activity.  Job 401 used up $500 direct materials, $1,000 direct labor cost, 200 direct labor hours, 100 machine hours, two set ups and three design changes.  Give the total cost of this job if traditionally overhead rate is based on the normal capacity of the firm where total overhead amounted to $250,000 and total direct labor cost estimated at $125,000 and $25,000 indirect labor cost.   Give the total cost of this job if the firm will shift to activity based costing.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The following are the four activities and the total cost pools of each which were gathered after a series of interviews and observations made by the team set up by the accounting department to change the traditional way of determining applied factory overhead for Printrite Inc.:    

 

ACTIVITIES

COST POOLS

COST DRIVER

OH RATE

Machine Setups

$ 25,000

   

Design Changes

15,000

   

Machining Support

80,000

   

Assembly Support

50,000

   

 

The following cost drivers were chosen as most appropriate for the above activities:

 

Direct labor cost                       $75,000 

Number of setups     200            

Number of machine hours 2,000

Number of design hours           500         

 

REQUIRED: 

  1. Match the activities to the cost drivers and compute the overhead rate per activity. 
  2. Job 401 used up $500 direct materials, $1,000 direct labor cost, 200 direct labor hours, 100 machine hours, two set ups and three design changes. 
  3. Give the total cost of this job if traditionally overhead rate is based on the normal capacity of the firm where total overhead amounted to $250,000 and total direct labor cost estimated at $125,000 and $25,000 indirect labor cost.  
  4. Give the total cost of this job if the firm will shift to activity based costing. 
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