Question

Calculating Activity-Based Costing Overhead Rates

Assume that manufacturing overhead for Glassman Company consisted of the following activities and costs:

Setup (1,000 setup hours)	$ 146,000
Production scheduling (400 batches)	60,000
Production engineering (60 change orders)	90,000
Supervision (2,000 direct labor hours)	56,000
Machine maintenance (12,000 machine hours)	96,000
Total activity costs	$ 448,000

The following additional data were provided for Job 845:

Direct material costs	$ 8,000
Direct labor cost (5 Milling direct labor hours; 35 Finishing direct labor hours)	$ 1,000
Setup hours	5 hours
Production scheduling	1 batch
Machine hours used (25 Milling machine hours;5 Finishing machine hours)	30 hours
Production engineering	3 change orders

(a) Calculate the cost per unit of activity driver for each activity cost category.

Setup
Production scheduling
Production engineering
Supervision
Machine operating

(b) Calculate the cost of Job 845 using ABC to assign the overhead costs.
$Answer

(c) Calculate the cost of Job 845 using the plantwide overhead rate based on machine hours. (Round your answer to the nearest dollar.)
$Answer

(d) Calculate the cost of Job 845 using a machine hour departmental overhead rate for the Milling Department ($28 per hour) and a direct hour overhead rate for the Finishing Department ($100 per hour). (Round your answer to the nearest dollar.)  
$Answer

Answer 1

Answer with working is given below

Cost per unit of Activity Driver a) Total Activity Activity Cost Pool Activities 1,000 400 60 2,000 12,000 Driver rate per set up hour per batch per change order per direct labor hour per machine hour Set up Production Scheduling Production Engineering Supervision Machine operating $146,000 $60,000 $90,000 $56,000 $96,000 $146 $150 $1,500 $28 $8 Cost of Job 845 based on ABC Costing b) Direct Material costs Direct Labor costs Overheads assigned Set up Production Scheduling Production Engineering Supervision Machine operating $8,000 $1,000 Activities consumed 5 set up hours 1 batch 3 change hours 40 labor hours 30 machine hours $730 $150 $4,500 $1,120 $240 Cost of Job 845 $15,740 Cost of Job 845 based on machine hours c) $8,000 $1,000 Direct Material costs Direct Labor costs Overheads assigned (30 machine hours X $37.33) $1,120 Cost of Job 845 $10,120 Machine hour rate Total Overheads Total Machine hours $448,000 12,000 $37.33 Cost of Job 845 based on machine hours d) $8,000 $1,000 Direct Material costs Direct Labor costs Overheads assigned Milling Department (25 hours X $28) Finishing Department (35 hours X $100) Cost of Job 845 $700 $3,500 $13,200