Question

Jackson Enterprises manufactures two products-a basic gizmo and an advanced model gizmo. The company is using an activity-based costing system. They have identified three activities for allocation of indirect costs. Activity Cost Driver Cost-Allocation Rate Materials receiving Number of parts $2.00 per part Production setup Number of setups $500.00 per setup Quality inspection Inspection time $90 per hour A production run for the basic model is 250 units, for the advanced model, 100 units. Each unit of product consumes the following activities: Number of Parts Number of Setups Basic Gizmo 10 1 setup per production run Advanced Gizmo 15 1 setup per production run Inspection Time 10 minutes 20 minutes Direct costs for the two products are as follows: Direct Materials Direct Labor Basic Gizmo $50.00 $ 75.00 Advanced Gizmo $95.00 $125.00 The amount of overhead allocated to one unit of the basic model would be: Note: Your answer should be in the format of "$***". Do not round interim calculations. Round the final answer to the nearest whole dollar. Use commas to separate thousands.

Answer 1

Solution:

Amount of Overhead Allocted to one unit of Basic Model:

Activity	Actual Activity Consumed by Basic Model (A)	Activity Rate (As Given in the Question) (B)	Overhead Costs Assigned per Unit (A*B)	Remarks	Amount
Material Receiving	10	Parts	$           2	Per Part	$           20
Production Setup	1	Setup per Production Unit	$       500	Per Production Run ($500/250)	$             2
Quality Inspection	0.1667	Hours (10Mins/ 60 Mins)	$         90	Per Hour	$           15
				Total Overhead Assigned	$           37

Amount of Overhead Allocated to one unit of basic Model = $ 37.00 per Unit.

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