Question

What is the amount of purchasing activity costs assigned to each?

Perdon Corporation manufactures safes-large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the proftability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead Mobile Safes 190 300 440 790 Walk-in Safes Units planned for production Material moves per product line Purchase orders per product line Direct labor hours per product line 54 1.690 VYour answer is correct The total estimated manufacturing overhead was $ 272000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round answers to 2 decimal places, eg 12.25) (1) Onemobile safe $ (2) One walk-in safe $ 456.03 per unit 3432.50 per unit eTextbook and Media Attempts: 4 of 7 used (b1) Your answer is correct The total estimated manufacturing overhead of $272,000 was comprised of $ 173,000 for materials handling costs and $ 99,000 for purchasing activity costs. Under activity-based costing (ABC): (Round answers to 2 decimal places, eg. 12.25) What amount of materials handling costs are assigned to: (a) One mobile safe $ b) One walk-in safe $ 546.32 per unit 1281.48per unit eTextbook and Media Attempts: 3 of 7 used

Answer 1

(b2)
(a)	One mobile safe	=	$          293.93	per unit
(b)	One walk - in safe	=	$          799.15	per unit
	Workings:
	Purchasing activity cost	=	$          99,000
	Total Purchase orders:
	Mobile Safes	=	440
	Walk - in Safes	=	340
	Total Purchase orders	=	780
	Pre determined Overhead Rate	=	$          126.92
			Mobile Safes	Walk - in Safes
(i)	Purchase orders	=	440	340
(ii)	Pre determined Overhead Rate	=	$          126.92	$             126.92
(iii)	Total Manufacturing Cost [(i) X (ii)]	=	$    55,846.15	$       43,153.85
(iv)	Units of Production	=	190	54
	Purchasing activity cost per unit [(iii) / (iv)]	=	$          293.93	$             799.15