Question

8.Quasi-Tech Corporation produces specially machined parts.

The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. Costs have been assigned to each activity using direct tracing and resource drivers: Activity Expected Cost Activity Driver Activity Capacity Engineering $1,000,000 engineering hours 5,000 hours Setups $ 900,000 setups 200 setups Machining $2,000,000 machine hours 25,000 machine hours Inspection $ 800,000 inspection hours 2,500 inspection hours Quasi-Tech Corporation produces two models: Model C and Model D. The following table shows how the two products consume activity. Model C Model D Units completed 300,000 200,000 Engineering hours 1,000 4,000 Setups 80 120 Machine hours 20,000 5,000 Inspection hours 1,500 1,000 Using the activity ratios for engineering and machining, what is the overhead cost assigned to the engineering pool? (round to two decimal places)

a.$1,880,000 b.$2,620,000 c.$2,870,000 d.$2,740,000

Answer 1

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Statementshowing Computations
Activity	Expected cost	Activity driver	Activity	cost per activity
Engineering	1,000,000.00	Engineering hours	5,000.00	200.00
Setups	900,000.00	Setups	200.00	4,500.00
Machining	2,000,000.00	Machine hours	25,000.00	80.00
Inspection	800,000.00	Inspection hours	2,500.00	320.00
Activity	cost per activity	Activity for Model C	O/H assigned to model C	Activity for Model D	O/H assigned to model D
Engineering	200.00	1,000.00	200,000.00	4,000.00	800,000.00
Setups	4,500.00	80.00	360,000.00	120.00	540,000.00
Machining	80.00	20,000.00	1,600,000.00	5,000.00	400,000.00
Inspection	320.00	1,500.00	480,000.00	1,000.00	320,000.00
			2,640,000.00		2,060,000.00