Question

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Assignment (2): CH 7: ABC Leader Corporation manufactures two products: Product O95C and Product M3IN. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products O95C and M31N Activity Cost Pool Activity Measure otal Cost Total Activity Machining Machine setupsNumber of setups Product design Order size Machine-hours 207,000 9,000MHs 140,000 350setups 2products Number of productsS 98,000 Direct labor-hours340,0000,000DLH s Activity Measure Product 0950Prodct M3I N Machine-hours Number of setups Number of products Direct labor-hours 3,000 160 6,000 190 4,000 6,000 Required: 1.Compute the plantwide (POHR) overhead rate. 2. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product 095C? 3. Using the ABC system, compute the activity rate for each activity cost pool. 4. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product 095C?

Answer 1

Ans 1
Plantwide overhead rate
Estimated overhead/Estimated DLH
785000/10000	$78.50
ans 2
	Product O95C
Manufacturing overhead cost alloacted	314000
	(78.5*4000)
ans 3
					Product O95C		Product M31N
Activity cost pool	Activity measure	Total cost C	Total activity T	Answer 3 Activity rate R=C/T	Activity A	Cost allocated R*A	Activity B	Cost allocated R*B
Machining	MH	$207,000	9000	$23	$6,000	$138,000	$3,000	$69,000
Machine setup	No. of setup	140000	350	$400.00	190	$76,000	160	$64,000
Product design	No. of product	98000	2	$49,000.00	1	$49,000	1	$49,000
Order size	DLH	340000	10000	$34.00	4000	$136,000	6000	$204,000
		$785,000			Total	$399,000		$386,000
ans 4
	Product O95C
Manufacturing overhead cost allocated	314000
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