Question

Wedge Industries, a small , family-run manufacturer, has adopted an ABC system. The following manufacturing activities, indirect manufacturing costs, and usage of cost drivers have been estimated for the year: Click the icon to view activities, total costs, and cost drivers.) (Click the icon for additional information) Read the requirements 1. Compute the activity cost allocation rates for the year. (Round your answers to the nearest whole dollar.) Activity cost allocation rate Machine setups (per setup) Machining (per machine hour) Quality control (per QC test) 2. Complete the following job cost record for Job 484 Manufacturing Job Cost Record JOB 484 Costs С C Direct material Direct labor.. Manufacturing overhead. Total job cost Enter any number in the edit fields and then continue to the next question.

Answer 1

Activity based costing is performed by allocating the activity costs based on the activity costs driver rate to products by analysing the costs associated with each product.

1. Activity cost allocation rates:

Activity Activity cost allocation rate $50 Machine setups (per setup) Machining (per machine hour) Quality Control (per QC test) $190 $85

Activity cost allocation rates are calculated by dividing the total estimated overhead costs of the activity by the cost driver quantity or usage.

Activity Activity cost allocation rate Machine setups Machining Quality Control Estimated total Estimated total manufacturing overhead costs usage of cost driver $155,000/ 3,100 setups $940,500 / 4,950 machine hours $365,500 / 4,300 tests run $50 per setup $190 per machine hour $85 per QC test

2. Job cost record for Job 484:

Job Cost Record JOB 484 Direct materials Manufacturing Costs $1,350 $435 $1,030 $2,815 Direct labor Manufacturing Overhead Total Job Cost

Direct materials = $1,350 (given)

Direct labor = Jim's wage + Driscilla's wage

Jim's wage = Hours worked × Houtly wage rate = 9 × $25 = $225
Driscilla's wage = 7 × $30 = $210

Direct labor = $225 + $210 = $435

Manufacturing overhead = Overhead costs for machine stepup + Overhead costs for machining + Overhead costs for Quality Control

Overhead costs for machine setup = Number of setups × Activity rate per setup = 2 × $50 = $100
Overhead costs for machining = Total machine hours for the job × Activity rate per machine hour = 4 × $190 = $760
Overhead costs for Quality Control = Number of quality control tests × Activity rate per quality control test = 2 × $85 = $170

Manufacturing overhead = $100 + $760 + $170 = $1,030