Question

Spin Cycle Architecture uses three activity pools to apply overhead to its projects. Each activity has a cost driver used to allocate the overhead costs to the projects. The activities and related overhead costs are as follows: initial concept formation $41,000; design $334,000; and construction oversight $116,550. The cost drivers and estimated use are as follows.

Activities		Cost Drivers		Estimated Use of Cost Drivers per Activity
Initial concept formation		Number of project changes		25
Design		Square feet		167,000
Construction oversight		Number of months		105

(a) Compute the predetermined overhead rate for each activity.

		Overhead Rate
Initial concept formation		$	per project change
Design		$	per square foot
Construction oversight		$	Per month

(b) Classify each of these activities as unit-level, batch-level, product-level, or facility-level.

Activities		Level
Initial concept formation		Product-levelUnit-levelFacility-levelBatch-level
Design		Batch-levelProduct-levelFacility-levelUnit-level
Construction oversight		Batch-levelFacility-levelUnit-levelProduct-level

Answer 1

Solution-

a)

	Overhead Rate
Initial concept formation	$1640	Per project change
Design	$2	per square foot
Construction oversight	$1110	per month

Working- Predetermined overhead rate = Estimated overhead / Estimated allocation base

*Initial concept formation = ($41000/25) = $1640

* Design = ($334000 / 167000) = $2

* Construction oversight = ($116550/105) = $1110

b)

Activities	Level
Initial concept formation	Product level
Design	Unit level
Construction oversight	Batch level