Question

Required Information Problem 17-3A Applying activity-based costing LO P1, P3, A1, A2, C3 [The following Information applies to the questions displayed below.] 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 $330,880 $175,00 Production Activity Grinding Polishing Product modification Providing power System calibration 589,800 $225,000 560,000 Additional Information on the drivers for its production activities follows. Grinding Polishing Product modification Providing power System calibration 12,90 machine hours 12, eee machine hours 1,600 engineering hours 19,880 direct labor hours 1,200 batches Number of units Machine hours Job 3175 200 units 400 MH Job 4286 2,580 units 4,800 MH Engineering hours 3a eng. 18 eng. Batches Direct labor hours hours 5 batches 490 DLH hours 15 batches 4,410 DLH Problem 17-3A Part 1 Required: 1. Classify each activity as unit level, batch level, product level, or facility level. Grinding Polishing Product modification Providing power System calibration |

Answer 1

	Grinding	Unit level
	Polishing	Unit level
	Product modification	Product level
	Providing power	Facility level
	System calibration	Batch level
	Computation of ABC rate
						Job 3175		Job 4286
	Activity	OH Costs(Col 1)	No. of activity base(Col 2)	Activity Rate(Col 1 / Col 2)		Activity driver incurred	Overhead assigned	Activity driver incurred	Overhead assigned
	Grinding & Polishing	$                                      5,05,000	12,000	$                             42.08	per machine hrs	400	$                 16,832	4000	$                 1,68,320
	Product modification	$                                      5,00,000	1,600	$                           312.50	per engg hours	30	$                   9,375	18	$                      5,625
	Providing power	$                                      2,25,000	19,000	$                             11.84	per direct labor hours	490	$                   5,802	4410	$                    52,214
	System calibration	$                                      5,60,000	1,200	$                           466.67	per batch	5	$                   2,333	15	$                      7,000
	Total Overhead Costs	$                                    17,90,000					$                 34,342		$                 2,33,159
	No. of units produced						200 units		2500 units
	Overhead Cost per unit						$                 171.71		$                      93.26
	Plantwide Overhead Rate =Total Manufacturing Overhead Cost / Total Direct labor hours
	Plantwide Overhead Rate =$1,790,000 / 19000 hours =$94.21 per dlhs
	Product	DL Hours	Plantwide Overhead Rate	Total Overhead Costs	Units Produced	OH Cost per unit
	Job 3175	490	$                                  94.21	$                           46,163	200	$                     230.81
	Job 4286	4140	$                                  94.21	$                        3,90,029	2500	$                     156.01