Question

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 Production Activity Indirect Labor Grinding $360,000 Polishing Product modification 550,000 Providing power System calibration 560,000 $130,000 $250,000 Additional information on the drivers for its production activities follows. Grinding Polishing Product modification Providing power System calibration 17,000 machine hours 17,000 machine hours 1,400 engineering hours 19,000 direct labor hours 350 batches Job 3175 Job 4286

Answer 1

Solution:

Allocation of overhead and computation of overhead cost per unit - ABC
Activity	Expected cost	Activity Base	Expected Activity	Activity Rate	Job 3175		Job 4286
					Activity Driver incurred	Overhead assigned	Activity Driver incurred	Overhead assigned
Grinding & Polishing	$490,000.00	Machine hours	17000	$40.77	400	$16,308.00	4000	$163,080.00
Product Modification	$550,000.00	Engineering hours	1400	$250.00	32	$8,000.00	22	$5,500.00
Providing Power	250000.00	Direct labor hours	19000	$13.06	420	$5,485.20	3780	$49,366.80
System Calibration	560000.00	Batches	350	$1,342.86	25	$33,571.50	75	$100,714.50
Total	$1,850,000.00					$63,364.70		$318,661.30
Nos of units						150		1875
Overhead cost per unit						$422.43		$169.95