Question

Durban Metal Products, Ltd., of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers. The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below: Activity Cost Pool Activity Measure Activity Rate Order size Number of direct labor-hours $ 16.80 per direct labor-hour Customer orders Number of customer orders $ 356.00 per customer order Product testing Number of testing hours $ 72.00 per testing hour Selling Number of sales calls $ 1,481.00 per sales call The managing director of the company would like information concerning the cost of a recently completed order for heavy-duty trailer axles. The order required 160 direct labor-hours, 11 hours of product testing, and 5 sales calls. Required: What is the total overhead cost assigned to the order for heavy-duty trailer axles?

Answer 1

Solution:

Computation of overhead assigned to Heavy duty trail axels
Activity	Activity rate	Actvity usage	Overhead assigned
Order Size	$16.80	160	$2,688.00
Customer order	$356.00	1	$356.00
Product testing	$72.00	11	$792.00
Selling	$1,481.00	5	$7,405.00
Total			$11,241.00