Question

4A Portfolio Photography uses activity based costing to allocate overhead to individual clients (jobs). Portfolio Photography is working on three weddings during the current month (May), and total overhead is divided among four separate indirect cost pools: camera overhead (leases and maintenance on cameras), photo printing overhead (leases and maintenance on photo printers), computer-related overhead (leases/repairs on computers and subscriptions to commercial photo editing software), and other overhead costs (rent, insurance, etc.). The annual budgeted indirect cost pools and driver levels are provided in the table below. Activity Estimated Cost Driver Annual Cost Estimated Annual Quantity of Cost Driver Camera overhead $45,000 photographer-days 900 Photo printing overhead $15,000 $ number of photos printed 375,000 Computer-related overhead $80,000 photo processessing hours 8,000 Other Overhead Costs $63,000 photos taken 315,000 The following information about the wedding clients was given for Мау. Garcia Wedding Smith Wedding Feng Wedding Beginning Balance (May 1st) $13,000 $4,000 SO Direct Labor $1,200 $2,900 $3,000 Direct Materials $850 $1,000 $370 photographer-days 18 14 30 number of photos printed 600 1,000 800 photo processessing hours 100 20 8 photos taken 2,200 3,000 3,200 By the end of May, Portfolio Photography completed work on the Garcia and Smith weddings. The Garcias have already picked up their photos and paid, but the Smiths are planning to pick up their photos and pay later in June. Portfolio Photography charges clients a 15% markup over total costs. Assume that Portfolio Photography is still working on the Feng at the end of May and that only the three above weddings were worked on during May, A. Calculate the amount of camera OH allocated per "photographer " day in the ABC system.

Answer 1

Calculation of Overhead Recovery Rates:

Working Note a.

Cost Pool - Camera Overhead($45,000)

Cost Driver - Photographer Days(900)

Overhead Recovery Rate= Camera Overhead / Photographer days

= $45,000 / 900

= $50 per Photographer day.

Working Note b.

Cost Pool - Photo Printing Overhead($15,000)

Cost Driver - No.of Photos Printed(375,000)

Overhead Recovery Rate = $15,000 / 375,000

= $0.04 per Photo printed.

Working Note c.

Cost Pool - Computer Related Overhead($80,000)

Cost Driver - Photo Processing Hours(8,000)

Overhead Recovery Rate = $80,000 / 8,000

= $10 per photo processing hour.

Working Note d.

Cost Pool - Other Overhead Costs($63,000)

Cost Driver - Photos Taken(315,000)

Overhead Recovery Rate = $63,000 / 315,000

= $0.20 per photo taken.

4A. Camera Overhead Allocated per photographer day = $50 per photographer day. (refer the working note a.)

4B. Photo Printing Overhead Costs allocated during May;

Overhead Recovery Rate for photo printing Overhead = $0.04 per photo printed (refer the working note b.)

Particulars	Garcia Wedding	Smith Wedding	Feng Wedding	Total
No.of Photos Printed	600	1000	800	2400
Photo Printing Overhead Allocated	600 X $0.04 = $24	1000 X $0.04 = $40	800 X $0.04 = $32	$24 + $40 + $32 =$96.

Photo Printing Overhead costs allocated during May = $96.

4C.Total Overhead Costs allocated to Smith Wedding during may;

Particulars	Smith Wedding
Beginning Balance	$4,000
Direct Labor	$2,900
Direct Materials	$1,000
Camera Overhead (14 days X $50 per photographer day)	$700
Photo Printing Overhead (1000 photos printed X $0.04 per photo printed)	$40
Computer related Overhead (20 hours X $10 per photo processing hour)	$200
Other Overhead Costs (3000 photos taken X $0.20 per photo taken)	$600
Total Costs	$9,440

Total Overhead Costs Allocated to Smith Wedding during May = $700 + $40 + $200 + $600 = $1,540

4D. Total Amount Portfolio Photography charged for Garcia Wedding;

Particulars	Garcia Wedding
Beginning Balance	$13,000
Direct Labor	$1,200
Direct Materials	$850
Camera Overhead (18 days X $50 per photographer day)	$900
Photo Printing Overhead (600 photos printed X $0.04 per photo printed)	$24
Computer related Overhead (100 hours X $10 per photo processing hour)	$1000
Other Overhead Costs (2200 photos taken X $0.20 per photo taken)	$440
Total Costs	$17,414
Mark Up over total costs @ 15% ($17,414 X 15%)	$2,612
Total Amount Charged	$20,026

4F. Camera Overhead Allocated to Feng Wedding during May;

Camera Overhead Recovery Rate = $50 per Photographer day (refer working note a.)

Number of Photographer days for Feng Wedding = 30 days

Camera Overhead Allocated to Feng Wedding during May = 30 Photographer Days X $50 per Photographer day

= $1,500.