Question

Sultan Company uses an activity-based costing system.

At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:

Activity Cost Pool	Activity Measure	Expected Overhead Cost			Expected Activity
Labor-related	Direct labor-hours	$	174,000		34,800		DLHs
Purchase orders	Number of orders	$	7,200		240		orders
Parts management	Number of part types	$	66,500		95		part types
Board etching	Number of boards	$	64,800		1,620		boards
General factory	Machine-hours	$	115,200		14,400		MHs

Required:

1. Compute the activity rate for each of the activity cost pools.

2. The expected activity for the year was distributed among the company’s four products as follows:

	Expected Activity
Activity Cost Pool	Product A			Product B			Product C			Product D
Labor-related (DLHs)		6,800			18,800			4,300			4,900
Purchase orders (orders)		72			28			41			99
Parts management (part types)		35			13			34			13
Board etching (boards)		330			780			510			0
General factory (MHs)		2,300			6,000			2,100			4,000

Using the ABC data, determine the total amount of overhead cost assigned to each product.

Using the ABC data, determine the total amount of overhead cost assigned to each product.

	Overhead Cost Assigned Activity Cost Pool Product A Product B Product C Product D Labor-related (DLHs) Purchase orders (orders) Parts management (part types) Board etching (boards) General factory (MHs) Total

Answer 1

Activity Cost Pool Activity Heasure 1. Calculation of activity rate for each of the activity cost pools: Activity Cod e st Pool Activity Heasuse Expected overhead Expreted Activity sate 'Cost (8) Activity for Cost pools borrelated direct labor hours 174.000 34800 DLH'S $51 DLH Forchase orders Number of orders 7,200 240 onders $30/ onder Bent management Nurher of Plent toutes 66,500 95 Port yes $7ool Part type Bexard etching Number of Boards 61,800 1.620 Boarly $40/ Board Ethisal kadony Machine houss 115,200 1,400 MHS $8/MH Activity rate - Expected overhead cast of) Expected activity 2. Calculation of total amount of overhead Cost assigned to Back product overhead cast assigned Activity Cost Product Pool Product Product Product AB lolor-deale Couls) $ 34,000 $94,000 $21,500 $24.500 CF500X$5) C18.800x15) C430 X$5) C4.900 X$5) Purchase ondes $ 840 $12.90 $39701 Cordes) (72.X $ 30) (28X8.30) (418$30) [99X $30) Posts management 199, 100 $ 23,800 Cont types) 159.100 C15x700) Board eth elching $13,000 (Bandi) C330X $40) General Factory CHHs) { $18.400 C2900 x 583 Total C13x500) C24X500) C13* $700 $ 31,200 $20,400) 1907 (780x $40) Chlox $40) Cox $401 1948.200 16,800 $32,000 C 6000X58) C2100X $8) C4000 XD I$ 183,140 483,730 568.570 $92,260