Question

Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Labor-related Purchase orders Parts management Board etching Ceneral factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 269,100 $ 11,000 $78,440 $ 85,050 $ 242,400 Expected Activity 29,900 DLHS 220 orders 106 part types 1,890 boards 20, 200 MS Required: 1. Compute the activity rate for each of the activity cost pools. 2. The expected activity for the year was distributed among the company's four products as follows: Expected Activity Activity Cost Pool Product Product Product C Product D Labor-related (DLI) 7,500 13,400 3,800 5,200 Purchase orders (orders) 66 30 32 92 Parts management (part typos) 19 47 Board etching (boards) 750 560 General factory (Mils) 2,600 7,300 3,700 6,600 29 580 11 0 Using the ABC data, determine the total amount of overhead cost assigned to each product.

Answer 1

1)	Calculation of Activity Rates
	Activity Cost pool	Expected OH	Expected Activity	Activity Rate
	Labour related	269,100	29,900	9.00	per DLH
	Purchase Orders	11,000	220	50.00	per ORDER
	Parts Management	78,440	106	740.00	per part type
	Board Etching	85,050	1,890	45.00	per board
	General Factory	242,400	20,200	12.00	per MH
2)	Overehad cost assigned to each product
	Activity Cost pool	Activity Rate	Product A Activity	Cost assigned to product A	Product B Activity	Cost assigned to product B	Product C Activity	Cost assigned to product C	Product D Activity	Cost assigned to product D
	Labour related	9.00	7,500	67,500	13,400	120,600	3,800	34,200	5,200	46,800
	Purchase Orders	50.00	66	3,300	30	1,500	32	1,600	92	4,600
	Parts Management	740.00	29	21,460	19	14,060	47	34,780	11	8,140
	Board Etching	45.00	580	26,100	750	33,750	560	25,200	-	-
	General Factory	12.00	2,600	31,200	7,300	87,600	3,700	44,400	6,600	79,200
	Total Cost assigned			149,560		257,510		140,180		138,740