Question

Problem 04-3A Applying activity-based costing LO P1, P3, A1, A2, C3

[The following information applies to the questions displayed below.]

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity	Indirect Labor				Indirect Materials				Other Overhead
Grinding	$	370,000
Polishing					$	110,000
Product modification		600,000
Providing power									$	265,000
System calibration		410,000

Additional information on the drivers for its production activities follows.

Grinding	11,000	machine hours
Polishing	11,000	machine hours
Product modification	2,100	engineering hours
Providing power	21,000	direct labor hours
System calibration	1,000	batches

	Job 3175		Job 4286
Number of units	140	units	1,750	units
Machine hours	250	MH	2,500	MH
Engineering hours	26	eng. hours	36	eng. hours
Batches	25	batches	75	batches
Direct labor hours	450	DLH	4,050	DLH

Problem 04-3A Part 5

Required:
5. If the company uses a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286? (Do not round intermediate calculations. Round "OH Cost per unit" answers to 2 decimal places.)

Answer 1

Production Activity	Indirect labor	Indirect materials	Other Overhead	Total
Grinding	370,000			370,000
Polishing		110,000		110,000
Product modification	600,000			600,000
Providing power			265,000	265,000
System calibration	410,000			410,000
Total	1,380,000	110,000	265,000	1,755,000

Total budgeted overheads = $1,755,000

Budgeted direct labor hours = 21,000

Predetermined overhead rate = Total budgeted overheads / Budgeted direct labor hour

= 1,755,000/21,000

= $83.5714285714 per direct labor hour

Overhead allocated to job 3175 = Actual direct labor hour x Predetermined overhead rate

= 450 x 83.5714285714

= $37,607

Overhead allocated to job 4286 = Actual direct labor hour x Predetermined overhead rate

= 4,050 x 83.5714285714

= $338,464

Overhead cost per unit of job 3175 = Overhead allocated to job 3175 / Number of units in job 3175

= 37,607/140

= $268.62

Overhead cost per unit of Job 4286 = Overhead allocated to job 4286/ Number of units in job 4286

= 338,464/1,750

= $193.41

Kindly comment if you need further assistance. Thanks‼!