Question

Check my After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows. Activity Setting up machines Inspecting components Providing utilities Cost $20,000 $ 7,500 $10,000 Driver 25 batches 5,000 parts 5,000 machine hours Overhead has been applied to output at a rate of 50% of direct labor costs. The following data pertain to Job 615 Direct materials Direct labor Batches Number of parts Machine hours $2,500 $3,500 2 batches 400 parts 500 machine hours Required: 1. Classify each of its three overhead activities as unit level, batch level product level, or facility level

Answer 1

Answer
1)
Setting upmachines	Batch level
Inspecting components	unit level
Providing utilites	Facility cost
2)
Total cost =direct material +direct labor + overhead
2500+3500+ (3500 * 50%]
2500+3500 +1750
$7,750
3)
	Activity rates	Overhead allocated
setting machines	20000/25=800 per batch	800*2=1600
Inspecting components	7500/5000 =$ 1.50 per parts	1.50*400=600
providing utilities	10000/5000=$ 2per MH	2*600=1200
		$                                 3,400
Total cost = 2500+3500+3400= $ 9400