Question

Required information (The following information applies to the questions displayed below) Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records. Part 2 of 3 Indirect Indirect Labor Other Overhead Materials $320,000 $135,000 Production Activity Grinding Polishing Product modification Providing power Systen calibration 600,000 $255,000 500,000 Additional information on the drivers for its production activities follows. Grinding Polishing Product modification Providing power System calibration 13,000 machine hours 13,000 machine hours 1,500 engineering hours 17,000 direct labor hours 400 batches Job 3175 200 units 550 MH Number of units Machine hours Engineering hours Batches Direct labor hours 26 eng. hours 30 batches 500 DLH Job 4286 2,500 units 5,500 MH 32 eng hours 90 batches 4,375 DLH

Answer 1

Ans.
					Job 3175		Job 4286
Activity	Overhead cost	Activity drivers	Activiy rate		Activity driver incurred	Overhead assigned	Activity driver incurred	Overhead assigned
	( A)	(B)	©		(D)	(E = C*D)	(F)	(G = C*F)
Grinding & polishing	$455,000	13000	$35	per machine hr.	550	$19,250	5500	$192,500
Product modification	$600,000	1500	$400	per eng. hr.	26	$10,400	32	$12,800
Providing power	$255,000	17000	$15	per direct labor hr.	500	$7,500	4375	$65,625
System calibration	$500,000	400	$1,250	per batch	30	$37,500	90	$112,500
	$1,810,000				Total Overhead Cost	$74,650		$383,425
					(/)Number of units	200		2500
					Avg. overhead cost per unit	$373.25		$153.37
*Calculations:
*Grinding & Polishing = $320,000 + $135,000   =   $455,000
*Activity rate   =    Overhead cost / Activity drivers
*Overhead assigned = Activity rate * Activity driver incurred
*Average overhead cost per unit = Total overhead cost / Number of units