Question

Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Labor-related Purchase orders Parts management Board etching General factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 156,000 $ 11,000 $ 80,000 $ 90,000 $ 180,000 Expected Activity 26,000 DLHS 220 orders 100 part types 2,000 boards 20,000 MHs Required: 1. Compute the activity rate for each of the activity cost pools. 2. The expected activity for the year was distributed among the company's four products as follows: Activity Cost Pool Labor-related (DLHS) Purchase orders (orders) Parts management (part types) Board etching (boards) General factory (MHS) Product A 6,000 60 30 500 3,000 Expected Activity Product B Product C Product D 11,000 4,000 5,000 30 40 90 15 40 15 900 600 0 8,000 3,000 6,000 Using the ABC data, determine the total amount of overhead cost assigned to each product. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the activity rate for each of the activity cost pools.

Answer 1

Req 1.
Activity rate
Activity			Total OH	Activity	Activity rate
Labor related		1,56,000	26000	6	per DLH
Purchase orders		11,000	220	50	Per order
Parts management		80,000	100	800	Per part type
Board etching		90,000	2,000	45	Per board
General Factory		1,80,000	20,000	9	per MH
Req 2.
Activity cost
Product A
Activity		Rate	Driver	Activity cost
Labor related	6	6000	36000
Purchase orders	50	60	3000
Parts management	800	30	24000
Board etching	45	500	22500
General Factory	9	3000	27000
Total activity cost			1,12,500
Product B
Activity		Rate	Driver	Activity cost
Labor related	6	11000	66000
Purchase orders	50	30	1500
Parts management	800	15	12000
Board etching	45	900	40500
General Factory	9	8000	72000
Total activity cost			1,92,000
Product C
Activity		Rate	Driver	Activity cost
Labor related	6	4000	24000
Purchase orders	50	40	2000
Parts management	800	40	32000
Board etching	45	600	27000
General Factory	9	3000	27000
Total activity cost			1,12,000
Product D
Activity		Rate	Driver	Activity cost
Labor related	6	5000	30000
Purchase orders	50	90	4500
Parts management	800	15	12000
Board etching	45	0	0
General Factory	9	6000	54000
Total activity cost			1,00,500