Multiple Versus Single Overhead Rates, Activity Drivers Deoro Company has identified the following overhead activities, costs,...

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Multiple Versus Single Overhead Rates, Activity Drivers Deoro Company has identified the following overhead activities, costs

Machine hours 24,500 19,000 Recelving hours 3,400 7,600 The companys normal activity is 7,600 direct labor hours. Required:

business accounting

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Answer 1

Answer #1

(1)

	Unit Cost
Model A	$173.21
Model B	$261.88

	Model A	Model B
Direct Materials	$635000	$810000
Direct Labor	$477000	$466000
Overhead	(5400 * $300.88) =$1624752	(2200 * $300.88) =$661936
Total	$2736752	$1937936
Units	15800	7400
Unit cost	$173.21	$261.88

Overhead Rate per Direct Labor hour = Total Overhead/Total Direct Labor hour

Total overhead = $451920 + $382800 + $957000 + $495000 = $2286720

Total DL hour = 5400 + 2200 = 7600

Rate per hour = $2286720/7600 = $300.88

(2)

	Unit Cost
Model A	$142.87
Model B	$326.67

	Model A	Model B
Direct Materials	$635000	$810000
Direct Labor	$477000	$466000
Overhead:
Setting up Equipment	(390* $807) =$314730	(170* $807) =$137190
Ordering costs	(6300* $22) =$138600	(11100* $22) =$244200
Machine costs	(24500 * $22) =$539000	(19000* $22) =$418000
Receiving	(3400* $45) =$153000	(7600* $45) =$342000
Total	$2257330	$2417390
Units	15800	7400
Unit cost	$142.87	$326.67

Activity	Cost (a)	Capacity (b)	Cost per activity driver (a/b)
Setting up Equipment	$451920	560 setups	$807
Ordering costs	$382800	17400 orders	$22
Machine costs	$957000	43500 machine hours	$22
Receiving	$495000	11000 receiving hours	$45

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