Question

i Data Table Х More Info -X 250 pounds of direct materials at $30 per pound 40 direct labor hours used at $50 per labor hour 80 machine hours used 7 change orders 50 pounds of hazardous waste generated Up to this point, hazardous waste disposal foes have been absorbed into the plantwide manufacturing overhead rate and allocated to all products as part of the manufacturing overhead process Recently, the company has been experiencing significantly increased waste disposal foos for hazardous waste generated by certain products, and as a result, profit margins on all products have been negatively impacted Company management wants to implement an activity based costing system so that managers know the cost of each product, including its hazardous waste disposal costs Print Done Print Done Data Table Estimated Activity for this Year 13,000 1,000 Description of Cost Pool Machine maintenance costs Engineering change orders Hazardous waste disposal Estimated Cost Cost Driver $ 520,000 Number of machine hours $ 50,000 Number of change orders $ 1,575,000 Pounds of hazardous materials generated $ 2.145,000 4,500 Total overhead cost

Answer 1

Requirement 1

Plant wide Overhead Rate =Total Manufacturing Overhead Cost / Total Machine Hours

Plant wide Overhead Rate =$2145000 / 13000 hours =$165 per machine hours

Calculation of Total Job Costs	.
Direct Materials (250 lbs * $30 )	7500
Direct labor ( 40 hrs * $50 )	2000
Overhead Costs(80 Machine hours*$165 )	13200
Total Costs for Job 352	$22700

Requirement 2

Computation of ABC rate	..	.	.	.
Activity	OH Costs(Col 1)	No. of activity base(Col 2)	Activity Rate(Col 1 / Col 2)	.
Machine Maintainance costs	520000	13,000	40	per machine hours
Engineering change orders	50000	1,000	50	per change orders
Hazardous waste disposals	1575000	4,500	350	per pound of hazardous material
Calculation of Overhead Costs
Activity	Activity Base	Activity Rate	Overhead costs
Machine Maintainance costs	80 Machine hours	40	3200
Engineering change orders	7 Change orders	50	350
Hazardous waste disposals	50 pound of hazardous material	350	17500
Total Overhead costs allocated to Job 352			$21050	.

Calculation of Total Job Costs	.
Direct Materials (250 lbs * $30 )	7500
Direct labor ( 40 hrs * $50 )	2000
Overhead Costs	21050
Total Costs for Job 350	$30550

Requirement 3

ABC system is more useful information as it takes into consideration all the acclivities related to production