Question

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Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go- karts: Deluxe and Basic. Activity Handling materials Inspecting product Processing purchase orders Paying suppliers Insuring the factory Designing packaging Expected Costs $650,000 925,000 130,000 200,000 325,000 100,000 Expected Activity 100,000 parts 1,500 batches 700 orders 500 invoices 40,000 square feet 2 models Assume that the following information is available for the company's two products for the first quarter of this year. Production volume Parts required Batches made Purchase orders Invoices Space occupied Modala Deluxe Model 10,000 units 20,000 parts 250 batches 50 orders 50 invoices 10,000 sq. ft. 1 madal Basic Model 30,000 units 30,000 parts 100 batches 20 orders 10 invoices 7,000 sq. ft 1 madal

Answer 1

Allocation made to Delux Model: Activity Handling materials Inspecting product Processing purchase orders paying suppliers Insuring the factory Designing packaging Total over head assigned (C) Production Volume (D) Average overhead cost per unit (C/D) Activity rate (A) 6.50 Per Part 616.67 Per Batche 185.71 Per Order 400.00 Per Invoice 8.13 Per Sq.ft 50000.00 Per Model Cost driver quantity incurred (B) 20000 Parts 250 Batches 50 orders 50 Invoices 10000 Square feet 1 Models Over head allocated (A*B) 130000 154167 9286 20000 81250 50000 444702 10000 44.47 Over head allocated (ATB) 195000 61667 Allocation made to Basic Model: Activity Handling materials Inspecting product Processing purchase orders paying suppliers Insuring the factory Designing packaging Total over head assigned (C) Production Volume (D) Average overhead cost per unit (C/D) Activity rate (A) 6.50 Per Part 616.67 Per Batche 185.71 Per Order 400.00 Per Invoice 8.13 Per Sq.ft 50000.00 Per Model Cost driver quantity incurred (B) 30000 Parts 100 Batches 20 orders 10 Invoices 7000 square feet 1 Models 3714 4000 56875 50000 371256 30000 12.38

Working Notes: Activity Handling materials Inspecting product Processing purchase orders paying suppliers Insuring the factory Designing packaging Activity rate (A) 650000 925000 130000 200000 Cost driver quantity incurred (B) 100000 Parts 1500 Batches 700 orders 500 Invoices 40000 Square feet 2 Models Over head allocated (A/B) 6.50 Per Part 616.67 Per Batche 185.71 Per Order 400.00 Per Invoice 8.13 Per Sq.ft 50000.00 Per Model 325000 100000