Question

year and has si n ce 20 points) The would how to Panchasing Department which and meesch working h ow is the Pag during the year was follows Activity Courier TTOO reports for 550.000 Sed Contacting supplies SO During the year, 1.500 purchase orders and by the purchasing materials were received and phone calls were made to supplies 30 perceiving reports and 11 phone calls to suppliers Product A manufacturing proc. mine the amo using de Product A 200 2 0 purchased hon in the d e med d d 6empYO Louers de 900

Answer 1

Answer)

Calculation of Total overhead cost allocated to product A using Activity Based Costing

Calculation of Cost per Activity

Activity	Cost Driver	Total overhead cost	Number of Activities	Cost per Activity
Issuing of Purchase orders	Number of purchase orders	$ 15,000	1,500 purchase orders	$ 10 per purchase order
Reviewing receiving reports for material purchases	Number of Shipments received	$ 70,000	2,000 shipments received	$ 35 per shipment received
Contacting Suppliers	Number of Phone Calls	$ 11,000	500 Phone Calls	$ 22 per phone call

Calculation of cost per purchase order

Cost per purchase order = Total overhead cost of placing purchase orders/ Total number of purchase orders

                                            = $ 15,000/ 1,500 purchase orders

                                            = $ 10 per purchase order       

Calculation of cost per shipment of material

Cost per shipment received = Total overhead cost of receiving and reviewing of shipments/ Total number of shipments received

                                            = $ 70,000/ 2,000 shipments received

                                            = $ 35 per shipment received

Calculation of cost per Phone call

Cost per phone call = Total overhead cost of phone calls/ Total number of phone calls made

                                            = $ 11,000/ 500 phone calls

                                            = $ 22 per phone call

Allocation of purchase department overhead cost to Product A

Activity	Cost Driver	Number of Activities pertaining to Product A	Cost per Activity	Total overhead cost Allocated to Product A
Issuing of Purchase orders	Number of purchase orders	20 purchase orders	$ 10 per purchase order	$ 200
Reviewing receiving reports for material purchases	Number of Shipments received	30 shipments received	$ 35 Per shipment received	$ 1,050
Contacting Suppliers	Number of Phone Calls	11 phone calls made	$ 22 per phone call made	$ 242
Total				$ 1,492

Conclusion: Total amount of purchase department overheads allocated to product A is $ 1,492.

Allocation of purchase department overheads to Product A

Overhead cost pertaining to Issuing of orders:

Allocated overhead cost = (Number of purchase orders of Product A) X (Overhead cost per purchase order)

                                               = 20 purchase orders X $ 10 per purchase order

                                               = $ 200.

Overhead cost pertaining reviewing and receiving of shipments:

Allocated overhead cost = (Number of Shipments received of Product A) X (Overhead cost per Shipment received)

                                               = 30 Shipments received X $ 35 per shipment received

                                               = $ 1,050.

Overhead cost pertaining phone calls made:

Allocated overhead cost = (Number of phone calls made of Product A) X (Overhead cost per phone call made)

                                               = 11 phone calls made X $ 22 per phone call made

                                               = $ 242.