Question

This Question: 1 pt 15 of 15 (14 completo) 500,000 Gwynnie Ple Company makes dessert ples for national fast food chains. Gwynnie Ple Company is considering using ABC costing and has the following activity cost pools and information available: Activities Estimated Overhead Costs Estimated Activity Material handling measured by batches $258,000 2,150 batches Maxing measured by batches $115,000 3,680 batches Packaging measured by units 2,150,000 units Maintenance measured by W of setups $15,000 200 setups Gwynnie Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours. The following information was gathered regarding Job 607 of units in the job 6,300 of units in each batch 1,000 of setups required to complete the job 1 # of machine hours - 220 How much would the overhead be overcosted or undercosted Gwynnie Ple Company continues to use the plantwide overhead rate as opposed to using ABC Costing? A. $57.60 underoosted B. $16.86 overcosted O c. $1,025 94 undercosted OD. $1,042 80 overcosted Click to select your answer. п

Answer 1

Answer

Option B - $ 16.86 Overcosted.

Workings

Overhead cost as per Machine Hour Rate ( Step 3 )	$ 1,042.80
Overhead cost as per ABC costing ( Step 2 )	$ 1,025.94
Overcosted by	$ 16.86

Step 1) Calculation of Cost driver rates for different activities.

Activity	Estimated Cost	Estimated Activity	Rate
Material Handling	258000	2150	120 per batch
Mixing	115000	3680	31.25 per batch
Packaging	86000	2150000	0.04 per unit
Maintenance	15000	260	57.69 per set-up

Step 2) Overhead Rate as per ABC System

Activity	Job 07	Over head
Cosr Driver	Quantity	Rate per Quantity
Material Handling	Batches	*5	120	600
Mixing	Batches	*5	31.25	156.25
Packaging	Units	5300	0.04	212
Maintenance	Set-up	1	57.69	57.69
Total Overhaed as per ABC				$ 1,025.94

*No of Batches= ( Total Units / Unit per batch )

= 5300 / 1060 = 5 Batches.

Step 3) Overhead Rate as per Machine Hour Rates.

Overhead Rate = Total Overhead Cost / Total Machine Hours

= (258000+115000+86000+15000) / 100000 hours

= 474000 / 100000

= $ 4.74 per machine hours

Therfore overhead cost for Job 607 = Machine Hrs Used * Overhead Rate

= 220 hours * 4.74

= $ 1,042.80