Question

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity	Indirect Labor				Indirect Materials				Other Overhead
Grinding	$	340,000
Polishing					$	110,000
Product modification		500,000
Providing power									$	265,000
System calibration		430,000

Additional information on the drivers for its production activities follows.

Grinding	12,000	machine hours
Polishing	12,000	machine hours
Product modification	1,900	engineering hours
Providing power	16,000	direct labor hours
System calibration	900	batches

	Job 3175		Job 4286
Number of units	200	units	2,500	units
Machine hours	400	MH	4,000	MH
Engineering hours	27	eng. hours	34	eng. hours
Batches	20	batches	60	batches
Direct labor hours	480	DLH	4,320	DLH

Required: 1. Classify each activity as unit level, batch level, product level, or facility level. Grinding Polishing Product modification Providing power System calibration

Answer 1

Solution 1:

K 26 29 30 31 32 33 Grinding Unit level Polishing Unit level Product modification Product level Providing power Facility level System calibration Batch level 34 35 36 39 40 41 42 43 44 45 46 49 50 51 52 53 54 55 56 58 59 60 61 62 et901 Sheet65 (8) Sheet904 ) Sheet905 Sheet906

Solution 2,3 and 4:

10 11 12 13 14 Job 3175 Job 4286 Activity cost pool Overhead costActivity driver Activity Rate activity driver incurred overhead assigned activity driver incurred overhead assigned Grinding and polishing $450,000 12000 $37.50 per machine hour 400 $15,000 4000 $150,000 Product modification $500,000 1900 $263.16 per engineering hour 27 $7,105 34| $8,947 Providing power $265,000 16000 $16.56 per direct labor hour 480 $7,949 4320 $71,539 System calibration $430,000 900 $477.78 Per batch 20 $9,556 60 $28.6671 Total overhead assigned $39,610 $259,153 /Number of units 200 2500 Cost per unit $198.05 $103.66 15 17 18 19 20 27 28 29 30 31 32 33 34 35 36 37 Sheet906 Sheet908 Sheet909 Sheet817 (4) Sheet911 Sheet912 Sheet595 (5)

Solution 5:

Predetermined Overhead Rate Overhead cost $1,645,000 $102.812500 Per DLH /Direct labor hours 16000 Product Activity Driver Plant wide OH Rate Total Overhead Cost Units produced OH Cost per unit Job 3175 480 $102.812500 $49,350 200 $246.75 Job 4286 4320 $102.812500 $444,150 2500 $177.66 12 14 15 16 19 20 21 22 Sheet906 Sheet908 Sheet909 Sheet817 (4) Sheet911 Sheet912 Sheet595 (5)