Question

Several years after reengineering its production​ process, Biltmore Corporation hired a new​ controller, Tammy English. For the upcoming​ year, Biltmore​'s budgeted ABC manufacturing overhead allocation rates are as​ follows:

Activity Allocation Base Materials handling. .... Number of parts Machine setup........ Number of setups Insertion of parts...... Number of parts Finishing ............ Finishing direct labor hours Activity Cost Allocation Rate $ 4.50 per part $ 325.00 per setup $ 31,00 per part $ 51.00 per hour

The number of parts is now a feasible allocation base because Biltmore recently installed a plantwide computer system. Biltmore produces two wheel​ models: Standard and Deluxe. Budgeted data for the upcoming year are as​ follows:

Requirement 1. Compute the total budgeted manufacturing overhead cost for the upcoming year. ​

Requirement 2. Compute the manufacturing overhead cost per wheel of each model using ABC.

Requirement 3. Compute the​ company's traditional plantwide overhead rate. Use this rate to determine the manufacturing overhead cost per wheel under the traditional system.  

Begin by identifying the formula to compute the current plantwide manufacturing overhead​ rate, then compute the rate.

Answer 1

Requirement 1. Compute the total budgeted manufacturing overhead cost for the upcoming year. Total budgeted Budgeted Quantity of Activity cost Indirect cost Activity Cost Allocation base Allocation rate Materials Handling 10000 $ 45,000.00 4.50 Machine set ups 40 $ 325.00 13,000.00 310,000.00 204,000.00 Inspection of parts Finishing 10000 $ 31.00 4000$ $ 51.00 Total budgeted Indirect cost 572,000.00 Requirement 2. Compute the manufacturi ng overhead cost per wheel of each model using ABC. Allocation rate Base used By Cost per Wheel Activity Standard Deluxe Standard Deluxe 4. Materials Handling Machine set ups 6 $ 4.50 18.00 27.00 0.02 $ 6 $ 325.00 0.02 6.50 6.50 $ 124.00 $ Inspection of parts Finishing 31.00 4 186.00 $ 3 $ 51.00 1 51.00 153.00 Total ABC allocated indirect cost $ 199.50 372.50 Requirement 3. Compute the company 's traditional plantwide overhead rate Budgeted total manfacturing overhead cost $ Plant wide overhead rate Budgeted total direct labour hours / 88.00 Per DL hour 6500 572,000.00 Total manfacturing overhead cost per wheel Direct labour hours per wheel Plant wide overhead rate Manfacturing overhead Standard $ $ $ 2.7 88.00 237.60 Deluxe 3.8* 88.00 334.40