Question

What is the total cost of Job 615 if Business solutions applies overhead at 50% of direct labor cost?

What is the total job of job 615 of business solution uses activity-based costing?

SP 17 After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows. Activity Cost Driver Setting up machines $20,000 25 batches Inspecting components $ 7,500 5,000 parts Providing utilities $10,000 5,000 machine hours Overhead has been applied to output at a rate of 50% of direct labor costs. The following data pertain to Job 615. Direct materials $2.500 Direct labor $3.500 Batches 2 batches Number of parts 400 parts Machine hours 600 machine hours O ere to search i a ***

Answer 1

1.

1. Calculation of total cost of Job 615
if Business solutions applies overhead at 50% of direct labor cost
Direct Materials		2500
Direct Labor		3500
OH (50%*Direct Labor)		1750
Total		7750

2.

2. Calculation of total cost of Job 615
if Business solutions applies overhead at activity-based costing
Direct Materials		2500
Direct Labor		3500
OH:		1750
Setting Up machines	2*800	1600
Inspecting Components	400*1.5	600
Providing Utilities	600*2	1200
Total		11150

3.

Calculation of OH Rate as per activity-based costing
		Cost	Driver	Rate
Setting Up machines		20000	Batches	25	800
Inspecting Components		7500	Parts	5000	1.5
Providing Utilities		10000	Machine Hours	5000	2