Question

Flynn Industries has three activity cost pools and two products. It estimates production 2,000 units of Product BC113 and 1,000 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following data relative to those activity cost pools and cost drivers. Annual Overhead Data Estimated Use of Cost Drivers per Product Estimated Use of Cost Product Product Drivers BC113 AD908 per Activity Estimated Overhead Activity Cost Pools Cost Drivers Machine setup Setups $23,400 39 23 16 Machining 97,280 5,120 1,060 4,060 Machine hours Orders Packing 30,680 520 200 320 Using the above data, do the following: Prepare a schedule showing the computations of the activity-based overhead rates per cost driver. Activity Cost Estimated Estimated Use of Cost Pools Overhead Drivers per Activity Activity-Based Overhead Rates Machine setup $ setups $ per setup Machining machine hours $ per machine hr. Packing orders per order $ $

Answer 1

Answer :-

Schedule showing the computation of the activity- based overhead rates per cost drivers:

Activity Cost Pool	Estimated Overheads(A)	Estimated use of cost driver per activity(B)	Activity Based overhead rates (A) / (B)
Machine Setup	$ 23,400	39 Setups	600
Machining	$ 97,280	5,120Machine hours	19
Packing	$ 30,680	520 Orders	59
	$ 151,360

Schedule assigning each activity’s overhead cost to the two Products:

BC113
Activity Cost Pool	Estimated use of cost driver per activity (A)	Activity Based overhead rates (B)	Cost Assigned (A) * (B)
Machine Setup	23 Setups	600	$13,800
Machining	1,060 Machine hours	19	$20,140
Packing	200 Orders	59	$11,800
Total Assigned cost			$45,740

AD908
Activity Cost Pool	Estimated use of cost driver per activity (A)	Activity Based overhead rates (B)	Cost Assigned (A) * (B)
Machine Setup	16 Setups	600	$9,600
Machining	4,060 Machine hours	19	$77,140
Packing	320 Orders	59	$18,880
Total Assigned cost			$105,620

Computation of Overhead cost per unit of each product:

	BC113	AD908
Overhead cost per unit	$45,740/2,000 units = $22.87	$105,620 / 1,000 units = $105.62