Question

2. Determining job costs using activity-based costing. Julio Manufacturing Company uses activity-based costing. The factory overhead budget for the coming period is $500,000, consisting of the following: . . $150,000 200,000 Cost Pool Budgeted Amount Direct labor support.... Machine support....... Machine setups ......... Design changes ............. Total ......................... 100,000 50,000 $500,000 The potential allocation bases and their estimated amounts were as follows: Cost Pool Budgeted Amount Number of design changes 50 Number of setups.... 200 Machine hours ....................................... 10,000 Direct labor hours ............ 20,000 Required: Using an excel working paper, 1. Determine the overhead rate for each cost pool, using the most appropriate allocation base for each pool. 2. Job 2525 required $25,000 for direct materials, $10,000 for direct labor, 500 direct labor hours, 1,000 machine hours, five setups, and three design changes. Determine the cost of Job 2525.

Answer 1

* Determine Job costs during activity (1) Determine overhead pale cost Pool Budget Amount! IOCO Hon Direct Labor Support machine support machine setup Design changes bases Direct labor Hour machine Hour No. of setup I No. of design changes Rate Pesactivity $ 7.5 $20 $500 $ 1000 Rare Direct labor support = $150,000 - 20000 DLH. = $75 DLH al machine suPPO Y - $ 200,000 - 10000 MH - $ 20 pes MH 3 machine setup - $100,000 - 200 No.of Setup SS00 Pes setup - 4 Design changes: & 50000 - SO No of design charge $ 1000 pes No of design charge

(21 cost of Job 2525: Direct material Direct labor Direct labor support (500 x $7.5) machine suPPORT (1000X $20] machine setup (sX 5500) besign change (3XS1000) Total cost of Job 2525 25000 10000 3750 20,000 2500 3000 $ 64250