Question

eBook Calculator Print Item Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Activity Driver Activity Capacity Setting up equipment $135,000 Number of setups 120 Ordering materials 10,200 Number of orders 600 Machining 89,600 Machine hours 11,200 Receiving 17,280 Receiving hours 1,080 Silven produces two models of cell phones with the following expected activity demands: Model X Model Y Units completed 5,900 11,800 Number of setups 80 40 Number of orders 200 400 Machine hours 6,400 4,800 Receiving hours 360 720 Required: 1. Determine the total overhead assigned to each product using the four activity drivers. Total Overhead Assigned Model X Model Y 2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are alloc two expensive activities in proportion to their costs. Round Interim calculations to two decimal places and round your final answers to the nearest dollar. Total Overhead Assigned $ Model X Model Y 3. Using ABC as the benchmark, calculate the percentage error. Round your answers to two decimal places. Percentage Error <

Answer 1

	A	B	C= A/B
Particulars	Expected Cost	Activity Capacity	Activity Allocation Rate
Setting up Equipment	135,000	120	1,125	per Setup
Ordering Materials	10,200	600	17	per Order
Machining	89,600	11,200	8	per Machine Hour
Receiving	17,280	1,080	16	per Receiving Hour

Model X

A. B. C=A*B

Particulars	Activity Allocation Rate	Activity Capacity for Model X	Total Overhead
Setting up Equipment	1,125	80	90,000
Ordering Materials	17	200	3,400
Machining	8	6,400	51,200
Receiving	16	360	5,760
Total Overhead			150,360

Model Y

A. B. C= A*B

Particulars	Activity Allocation Rate	Activity Capacity for Model X	Total Overhead
Setting up Equipment	1,125	40	45,000
Ordering Materials	17	400	6,800
Machining	8	4,800	38,400
Receiving	16	720	11,520
Total Overhead			101,720

Requirement 2

Ordering Materials = $ 10,200

Ratio of Setting up Equipment to Machining = 135,000:89,600

Ordering Materials Cost allocated to Setting up Equipment = 10,200 * 135,000 / 224,600

Ordering Materials Cost allocated to Setting up Equipment = $ 6,131

Ordering Materials Cost allocated to Machining = 10,200 * 89,600 / 224,600

Ordering Materials Cost allocated to Machining = $ 4,069

Receiving Costs = $ 17,280

Ratio of Setting up Equipment to Machining = 135,000 : 89,600

Receiving Costs allocated to Setting up Equipment = 17,280 * 135,000 / 224,600

Receiving Costs allocated to Setting up Equipment = $ 10,386

Receiving Costs allocated to Machining = 17,280 * 89,600 / 224,600

Receiving Costs allocated to Machining = $ 6,894

Main Work

Total Setting up Costs after allocation = 135,000 + 6,131 + 10,386 = $ 151,517

Total Machining Costs after Allocation = 89,600 + 4,069 + 6,894 = $ 100,563

A. B. C= A/B

Particulars	Expected Cost	Activity Capacity	Activity Allocation Rate
Setting up Equipment	151,517	120	1,262.64	per Setup
Machining	100,563	11,200	8.98	per Machine Hour

For Model X

For Total Amount = Activity Allocation Rate * Activity Capacity

Particulars	Activity Allocation Rate	Activity Capacity	Total Amount
Setting up Equipment	1,262.64	80	101,011
Machining	8.98	6400	57,465
Total Overhead			158,476

For Model Y

Particulars	Activity Allocation Rate	Activity Capacity	Total Amount
Setting up Equipment	1,262.64	40	50,506
Machining	8.98	4,800	43,098
Total Overhead			93,604

Question 3

Overhead Cost of Model X as per ABC = $ 150,360

Overhead Cost of Model X as per Question 2 = $

Cost = 158,476

Change in Overhead Cost = 158,476 - 150,360 = $ 8,116

Percentage Error = Change / Overhead Cost as per ABC * 100

Percentage Error = 8,116 / 150,360 * 100 = 5.40%

For Model Y

Overhead Cost of Model Y as per ABC = $ 101,720

Overhead Cost of Model Y as per Question 2 = $

Cost = 93,604

Change in Overhead Cost = 93,604 - 101,720= $ 8,116

Percentage Error = Change / Overhead Cost as per ABC * 100

Percentage Error = (8,116) / 101,720 * 100 = (7.98%)