Question

Bluefield has decided to use an ABC costing system and has identified the following detailed information about its cost pools and cost drivers:

Activity cost pools
Materials handling	$48,300
Machine maintenance	$16,720
Cost drivers
Number of material moves	420
Number of machine hours	44,000

Required:
1. Calculate Bluefield’s activity rate for each cost pool.
2. Determine the amount of overhead assigned to Bluefield’s products if each has the following activity demands:

	Product A	Product B
Number of material moves	210	210
Number of machine hours	16,500	27,500

1. Calculate Bluefield’s activity rate for each cost pool. (Round your final answer for per material moves to nearest dollar amount and per machine hour to 4 decimal places.)

	Activity Rate Materials Handling per Material Move Machine Maintenance per Machine Hour

2. Determine the amount of overhead assigned to Bluefield’s products if each has the following activity demands: (Round intermediate calculations to 4 decimal places and your final answers to 2 decimal places.)

	Product A	Product B
Number of material moves	210	210
Number of machine hours	16,500	27,500

	Total Overhead Assigned Product A Product B

Answer 1

Requirement 1

Material handling	$          115.00	Per material move
Machine maintenance	$               0.38	Per Machine hour

Requirement 2

	Total Activity cost
Product A	$ 30,420.00
Product B	$            34,600.00

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Material handling	Number of material move	$ 48,300	420	$          115.00	Per material move
Machine maintenance	Number of Machine hour	$ 16,720	44000	$               0.38	Per Machine hour

.

Cost assigned to Product A
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Material handling	$        115.00	210.00	$ 24,150
Machine maintenance	$             0.38	16,500.00	$ 6,270
Total Overheads assigned			$ 30,420

.

Cost assigned to Product B
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Material handling	$        115.00	210	$ 24,150
Machine maintenance	$             0.38	27500	$ 10,450
Total Overheads assigned			$ 34,600