Question

Adria Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company's five activity cost pools: Activity Cost Pool Labor-related Purchase orders Material receipts Relay assembly General factory Activity Measure Direct labor-hours Number of orders Number of receipts Number of relays Machine-hours Expected Overhead Cost $ 35,000 $ 4,000 $ 10,450 $ 7,000 $240,000 Expected Activity 7.000 DLHS 2,000 orders 950 receipts 1.000 relays 40,000 Mits Problem 4-18 Part 2 2. The expected activity for the year was distributed among the company's four products as follows: Product b 600 750 Expected Activity Product Product 500 3.500 350 20B 342 170 7.000 8.000 Activity Cost Pool Labor-related (DLHS) Purchase orders (orders) Materials receipts (receipts) Relay assembly (relays) General factory (Mits) 800 Product 2,400 100 400 170 12.000 300 360 13,000 Using the ABC data, determine the total amount of overhead cost assigned to each product.

Answer 1

Calculation of activity rate for each cost pool
Activity cost pool	Expected overhead cost	Expected activity	Activity rate
Labor related	$35,000	7000	$5	per DLHs
Purchase orders	$4,000	2000	$2	per order
Material receipts	$10,450	950	$11	per receipts
Relay assembly	$7,000	1000	$7	per relays
General factory	$240,000	40000	$6	per MHs
Calculation of overhead cost assigned to each product
	Product A	Product B	Product C	Product D
Labor related	$12,000	$2,500	$17,500	$3,000
	2400*5	500*5	3500*5	600*5
Purchase orders	$200	$700	$1,600	$1,500
	100*2	350*2	800*2	750*2
Material receipts	$4,400	$2,288	$3,762	$0
	400*11	208*11	342*11	0*11
Relay assembly	$1,190	$1,190	$2,100	$2,520
	170*7	170*7	300*7	360*7
General factory	$72,000	$42,000	$48,000	$78,000
	12000*6	7000*6	8000*6	13000*6
Total overhead costs	$89,790	$48,678	$72,962	$85,020