Question

rosalind franklin - Goog- work #5 Homework #5 Electronics Produ Help Save & Exit Submit Check my work Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Activity (Cost) Machine maintenance ($330,000) Setups ($770,000) Packing ($ 194,000) Photo development ($606, 800) Cost Driver Number of machine hours Number of setups Number of cartons Number of pictures Type of Textbook Deluxe Hoderate Economy 330 990 1,320 35 20 20 3,700 1,700 2,000 50 ces Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings. Required a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Deluxe 45,000 Moderate 135,000 Economy 180,000 Determine the overhead cost per book for each book type. b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system. < Prev 3 of 6 !!! Next > Coronti

Answer 1

Working as follows:

	Amount
Machine maintenance	$330,000
Setups	$770,000
Packing	$194,000
Photo development	$606,800
Total overhead cost	$1,900,800
	Hours
Deluxe	330
Moderate	990
Economy	1320
Total machine hours	2640
Overhead rate (Total overhead cost ÷ Total machine hours)	$720

______________________________________________________________________

(a)

Determine the overhead cost per book as follows:

	Deluxe	Moderate	Economy	Total
Machine hours	330	990	1320	2640
Overhead rate	$720	$720	$720
Total overhead	$237,600	$712,800	$950,400	1900800
÷
Number of books	45,000	135,000	180,000
Cost per book	$5.28	$5.28	$5.28

______________________________________________________

(b)

Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system.

Compute overhead rate based on activity:

		Total	Rate
Machine maintenance	$330,000	2640 machine hours	$125
Setups	$770,000	70 setups	$1,100
Packing	$194,000	100 cartons	$1,940
Photo development	$606,800	7400 pictures	$82

	Deluxe	Moderate	Economy
Machine maintenance	$41,250	$123,750	$165,000
	(330*$125)	(990*$125)	(1320*$125)
Setups	$38,500	$22,000	$16,500
	(35*$1100)	(20*$1100)	(15*$1100)
Packings	$38,800	$58,200	$97,000
	(20*$1940)	(30*$1940)	(50*$1940)
Photo developments	$303,400	$139,400	$164,000
	(3700*$82)	(1700*$82)	(2000*$82)
Total	$421,950	$343,350	$442,500
÷
Number of books	45,000	135,000	180,000
Cost per book	$9.38	$2.54	$2.46