Question

Craftmore Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity	Indirect Labor				Indirect Materials				Other Overhead
Grinding		$	360,000
Polishing						$	215,000
Product modification			550,000
Providing power										$	255,000
System calibration			440,000

Additional information on the drivers for its production activities follows. DRIVERS

Grinding and Polishing	11,000	machine hours
Product modification	1,900	engineering hours
Providing power	21,000	direct labor hours
System calibration	1,300	batches

Required:
1. Compute the activity overhead rates using ABC. Form cost pools as appropriate.

	Job 3175 ----------Activity Rate---------- Activity Driver Incurred Overhead Assigned Grinding and Polishing Product modification Providing power System calibration Job 4286 ----------Activity Rate---------- Activity Driver Incurred Overhead Assigned Grinding and Polishing Product modification Providing power System calibration

	Job 3175		Job 4286
Number of units	170	units	2,125	units
Machine hours	450	MH	4,500	MH
Engineering hours	27	eng. hours	22	eng. hours
Batches	30	batches	90	batches
Direct labor hours	460	DLH	4,140	DLH

2. Determine overhead costs to assign to the following jobs using ABC. (Do not round your intermediate calculations. Round your activity rate answers to 2 decimal places and other answers to nearest whole dollar amount.)

3. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286? (Round average overhead cost per unit to 2 decimal places.)

Job 3175		Job 4286
Number of units	170	units	2,125	units
Machine hours	450	MH	4,500	MH
Engineering hours	27	eng. hours	22	eng. hours
Batches	30	batches	90	batches
Direct labor hours	460	DLH	4,140	DLH

4. If the company used a plantwide overhead rate based on direct labor hours, what would be the overhead cost for each unit of Job 3175? Of Job 4286? (Round OH cost per unit to 2 decimal places.)

Job 3175		Job 4286
Number of units	170	units	2,125	units
Machine hours	450	MH	4,500	MH
Engineering hours	27	eng. hours	22	eng. hours
Batches	30	batches	90	batches
Direct labor hours	460	DLH	4,140	DLH

5. Compare the overhead costs per unit computed in requirements 3 and 4 for each job. Which method more accurately assigns overhead costs? (Round your answers to 2 decimal places.)

Job 3175		Job 4286
Number of units	170	units	2,125	units
Machine hours	450	MH	4,500	MH
Engineering hours	27	eng. hours	22	eng. hours
Batches	30	batches	90	batches
Direct labor hours	460	DLH	4,140	DLH

Answer 1

Answer to Question 1:

Answer to Question 2:

Answer to Question 3:

Answer to Question 4: