Question

HOW DO I CALCULATE?

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records. Indirect Materials Other Overhead Indirect Labor $390,000 $185,000 Production Activity Grinding Polishing Product modification Providing power System calibration 650,000 $ 220,000 450,000 Additional information on the drivers for its production activities follows. Grinding Polishing Product modification Providing power System calibration 8,000 machine hours 8,000 machine hours 1,600 engineering hours 16,000 direct labor hours 1,000 batches Number of units Machine hours Job 3175 190 units 400 MH Job 4286 2,375 units 4,000 MH Engineering hours 35 eng. 26 eng. Batches Direct labor hours hours 35 batches 520 DLH hours 105 batches 4,680 DLH Required: 2, 3 & 4. Compute the activity overhead rates using ABC. Combine the grinding and polishing activities into a single cost pool. Determine overhead costs to assign to the above jobs using ABC. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286? (Round your activity rate and average overhead cost per unit to 2 decimal places. Round "overhead assigned to the nearest whole dollar.) Job 3175 Overhead Cost Activity Job 4286 Activity driver Overhead incurred assigned Activity Drivers Activity Rate Overhead assigned Activity driver incurred Grinding & Polishing Machine hours Engineering hrs. Product modification Direct labor hrs. Providing power System calibration batches

Answer 1

				Job 3175		JOb 4286
Activity	Overhead cost	Activity drivers	Activity rate	Activity driver incurred	Overhead assigned	Activity driver incurred	Overhead assigned
Grinding & polishing	575000	8000 Mh	71.88 per MH	400	28752	4000	287520
Product modification	650000	1600 engineering hour	406.25 per engineering hour	35	14219	26	10563
Providing power	220000	16000 labor hour	13.75 per labor hour	520	7150	4680	64350
System callibration	450000	1000 Batches	450 per batch	35	15750	105	47250
Total overhead assigned					65871		409683