Question

Angora, Inc. uses activity-based costing to cost its two products: Standard and Deluxe. The company has provided the following data relating to its activities: Estimated Cost Cost Pools Machine (machine-hours) Cutting (number of cuts) Sales (number of orders) $144,000 $536,000 $108,000 Estimated Activity Deluxe 7,000 Standard 1,000 3,000 Machine hours 5,000 Number of cuts 2,000 7,000 Number of orders Required: What is the activity rate for the cutting cost pool? a. If actual activity is the same as that estimated, what is the total amount of overhead cost allocated to the Standard product? b. 10. Camilla, Inc. uses activity-based costing to cost its two products: Standard and Deluxe. The company has provided the following data relating to its activities: Cost Pools Estimated Cost $144,000 $536,000 $108,000 Machine (machine-hours) Cutting (number of cuts) Sales (number of orders) Estimated Activity Standard Deluxe Machine hours Number of cuts Number of orders 1,000 3,000 7,000 7,000 5,000 2,000 Required: What is the activity rate for the sales cost pool? a. b. If actual activity is the same as that estimated, what is the total amount of overhead cost allocated to the Deluxe product?

Answer 1

a]	CALCULATION OF ACTIVITY RATES:
	Cost pools	Estimated Cost	Estimated Activity		Activity rate
	Machine	$      1,44,000	8000	Machine hours	$             18.00	per MH
	Cutting	$      5,36,000	8000	Number of cuts	$             67.00	per cut
	Sales	$      1,08,000	9000	Number of orders	$             12.00	per order
b]	OVERHEAD ALLOCATION:	Standard	Deluxe
	Machining	$         18,000	$      1,26,000
	Cutting	$      2,01,000	$      3,35,000
	Sales	$         84,000	$         24,000
	Total overhead allocated	$      3,03,000	$      4,85,000
	ANSWERS:
a]	Activity rate for sales cost pool =	$            12.00	per order
b]	Total amount of overhead allocated
	to deluxe =	$      4,85,000