Question

5. Old'n'New (ON) is a well-established manufacturing company that produces vintage furniture ON has used direct labor hours as the basis for allocating company-wide overhead for many years. However, given recent investments in manufacturing technologies, management feels that ABC costing would perhaps provide a more accurate assessment of the true price of the goods produced The following costs have been accumulated and corresponding drivers measured Budgeted Actual Budgeted Actual Driver Usage Chairs Chairs Tables Tables Driver Usage Driver Usage Budgeted Actual Cost Usa ge Cost Pool Cost $40,000 $40,000 $50,000 $53,000 100,000 84,000 Depreciation Lathing Machine 50,000 45,000 10,000 15,000 Factory production labor hrs Direct 20,000 24,000 Inventory Storage/Wages Handling Shipments Materials #of $120,000 $110,000 250 230 50 60 Additionally, the following information is available relative to production levels Expected Production Actual Production Chairs 7,500 units 10,000 units 500 units Tables 600 units What would be the per-unit overhead allocated to a chair produced by ON this period? What about a table? (NOTE: do not round intermediate calculations, round per-unit costs to the nearest cent.)

Answer 1

Activity Rate
Activity cost pool	Activity Measure	Actual Overhead cost	Actual Activity	Activity Rate
Depreciation	Machine hours	$40,000	60000 MHs	$0.67	per MHs
Utilities	Direct labour hours	$53,000	108000 DLH	$0.49	Per DLH
Inventory Storage	No. of Shipments	$110,000	290 shipments	$379.31	Per shipment
Overhead Allocated to Chairs
Activity cost pool	Activity Measure	Actual Overhead cost	Actual Activity - Chairs	Overhead allocated to Chairs
Depreciation	Machine hours	$40,000	45000 MHs	$30,000.00
Utilities	Direct labour hours	$53,000	84000 DLH	$41,222.22
Inventory Storage	No. of Shipments	$110,000	230 shipments	$87,241.38
Total Overheads				$158,463.60
Number of units				7500
Overhead allocated per unit				$21.13
Overhead Allocated to Table
Activity cost pool	Activity Measure	Actual Overhead cost	Actual Activity - Tables	Overhead allocated to Tables
Depreciation	Machine hours	$40,000	15000 MHs	$10,000.00
Utilities	Direct labour hours	$53,000	24000 DLH	$11,777.78
Inventory Storage	No. of Shipments	$110,000	60 shipments	$22,758.62
Total Overheads				$44,536.40
Number of units				600
Overhead allocated per unit				$74.23