Question

Required information [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 Indirect Labor $340,000 Other Overhead Indirect Materials $220,000 Production Activity Grinding Polishing Product modification Providing power System calibration 500,000 $200,000 520,000 Additional information on the drivers for its production activities follows. 1,600 engineering Grinding 14,000 machine hours Polishing 14,000 machine hours Product modification hours Providing power 14,000 direct labor hours System 1,400 batches calibration Job 3175 150 units 500 MM Number of units Machine hours Engineering hours Batches Direct labor hours Job 4286 1,875 units 5,000 MH 28 eng. hours 15 batches 4,598 DLH 3s eng. hours 5 batches 510 DLH Required: 2,3 & 4. Compute the activity overhead rates using ADC Combine the grinding and polishing activities into a single cost pool. Determine overhead costs to assign to the above jobs using ADC What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 42867 (found your activity rate and average overhead cost per unit to 2 decimal places. Round "overhead assigned to the nearest whole dollar) Job 3175 Activity driver Incurred Overhead Cost Activity Activity Rate Job 4286 Activity driver Overhead Incurred assigned Overhead assigned Grinding & Polishing Produot modification Activity Drivers Machine hours Engineering hrs Direct labor hors batches Providing power System calibration

Answer 1

The answer is as follows:

Calculation of cost driver rate for each activity:

Activity	Cost pool	Cost driver	Cost driver quantity	Cost driver rate/ Activity Overhead Rates
Grinding And Polishing	560000	Machine hours	14000	40 per machine hour
Product Modification	500000	Engineering Hours	1600	312.50 per Engineering Hour
Provding Power	200000	Direct labour hours	14000	14.28 per Direct labour hour
System Calibration	520000	No. of Batches	1400	371.43 per batch

Calculating Ovehead Cost per Unit for Job 3175 and Job 4286:

Activity	Cost Driver Rate	Job 3175	Job 4286
Cost Driver Quantity	Overheads Cost	Cost Driver Quantity	Overheads Cost
Grinding And Polishing	40 per machine hr	500	20000	5000	200000
Product Modification	312.50 per Engineering Hr	35	10938	28	8750
Provding Power	14.28 per Direct Labour Hr	510	7283	4590	65545
System Calibration	371.43 per Batch	5	1857	15	5571
Total			40078		279866
No. of Units			150		1875
Overhead Cost Per Unit			267.19		149.26