Question

Poldberg Co. uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system: Overhead costs: Wages & Salaries Factory Supplies Total $806,000 488,000 $1,294,000 Distribution of resource consumption: Clean-Up Other Total Activity Cost Pools Wages and salaries Factory Supplies Inspection 60% 22% 18% 100% 48% 20% 32% 100% The amount of activity for the year is as follows: Activity Cost Pool Clean-Up Inspection Activity 1,000 Batches 400 Inspections a. How much OVERHEAD cost would be allocated to a "Customer A,” who initiated 125 batches and 55 inspections in a year?

Question C is the most important to be answered

Answer 1

a. N い A B с 1 2 Clean-up Inspection 3 Wages and salaries $177,320 $483,600 4 Factory supplies $234,240 $97.600 5 Total $411,560 $581,200 6 7 Allocation rate 8 Clean-up $411.56 per batch 9 Inspection $1,453.00 per inspection 10 11 Overhead cost allocated to Customer A: 12 Clean-up $51.445 13 Inspection $79.915 14 Total overhead cost allocated to Customer A $131,360 15 16 b. 17 Customer Margin Report 18 Sales $580.000 19 Less: Expenses 20 Direct materials $230,000 21 Direct labor $150.000 22 Selling cost $80.000 23 Overheads $131,360 24 Total expenses $591,360 25 Customer margin ($11,360) 26 27 c. per batch 28 29 30 31 32 1 2 3 4 5 $581.200 $411.56 $51,445 $79.915 $460.000

Calculations are shown below: 6 A B с 1 a. 2 Clean-up Inspection 3 Wages and salaries =806000*22% =806000*60% 4 Factory supplies =488000*48% =488000*20% 5 Total =B3+B4 =C3+C4 6 7 Allocation rate 8 Clean-up =B5/1000 per batch 9 Inspection =C5/400 per inspection 10 11 Overhead cost allocated to Customer A: 12 Clean-up =B8*125 13 Inspection =B9*55 14 Total overhead cost allocated to Customer A =B12+B13 15 16 b. 17 Customer Margin Report 18 Sales 580000 19 Less: Expenses 20 Direct materials 230000 21 Direct labor 150000 22 Selling cost 80000 23 Overheads =B14 24 Total expenses =SUMB20:B23) 25 Customer margin =C18-C24 26 27 c. 28 1 =C5 29 2 =B8 30 3 =B12 31 4 =B13 32 5 =SUM(B20:B22) per batch