Question

NEXT Brief Exercise 17-12 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 $47,800; design $447,000; and construction oversight $116,550. The cost drivers and estimated use are as follows. Activities Initial concept formation Design Construction oversight Cost Drivers Number of project changes Square feet Number of months Estimated Use of Cost Drivers per Activity 20 149,000 105 (a) Compute the predetermined overhead rate for each activity Overhead Rate Initial concept formation $ per project change Design S per square foot Construction oversight S Per month (b) Classify each of these activities as unit-level, batch-level, product-level, or facility-level Activities Level Initial concept formation Design Construction oversight

Answer 1

Solution

	Activity rate
Initial concept formation	$    2,390.00	Per project change
Design	$            3.00	Per square foot
Construction oversight	$    1,110.00	Per month

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Activities	Level
Initial concept formation	Product-level
Design	Product-level
Construction oversight	facility-level

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Initial concept formation	Number of project change	$ 47,800	20	$       2,390.00	Per project change
Design	Number of square foot	$ 447,000	149000	$               3.00	Per square foot
Construction oversight	Number of month	$ 116,550	105	$       1,110.00	Per month