Question

10) The following overhead cost information is available for Compton Corporation for 2018: Activity Purchasing Receiving Machine setups Quality control Allocation Base Number of purchase orders Number of shipments received Number of setups Number of inspections Overhead Cost $ 80,000 60,000 150,000 48,000 During the year, 4,000 purchase orders were issued; 30,000 shipments were received; 3,000 machine setups were performed; and 3,000 inspections were conducted. a) What is the overhead rate for the purchasing activity? b) What is the overhead rate for the receiving activity? c) What is the overhead rate for the machine setups? d) What is the overhead rate for the quality control activity? e) If Job #229 required 5 purchase orders, 10 shipments, 8 machine setups, and 4 inspections to fill, how much overhead should be assigned to Job #2292

Answer 1

Answer

• Working and Answer calculations:

	Overhead cost	Activity driver		Overhead rate	Job #229 Activity driver		Overhead assigned ot Job #229
	[A]	[B]		[C = A / B]	[D]		[E = C x D]
Purchasing	$80,000	4,000	purchase orders	$20	5	purchase orders	$100
Receiving	$60,000	30,000	shipments	$2	10	shipments	$20
Machine Setips	$150,000	3,000	machine setups	$50	8	machine setups	$400
Quality Control	$48,000	3,000	inspections	$16	4	inspections	$64
					Total		$584

• Answers
  

[a]	$20	per pucrhase order
[b]	$2	per shipment
[c]	$50	per machine setup
[d]	$16	per no. of inspection
[e]	$584