Question

Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: 8 01:59:26 Activity Cost Pool Labor-related Purchase orders Parts management Board etching General factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 241,500 $ 6,060 $ 90,300 $ 69,600 $ 193,000 Expected Activity 34,500 DLHS 202 orders 105 part types 1,740 boards 19,300 MHS Required: 1. Compute the activity rate for each of the activity cost pools. 2. The expected activity for the year was distributed among the company's four products as follows: Product A 5,700 53 Expected Activity Product B Product C Product D 19,700 4,900 4,200 92 13 17 740 650 8,400 2,000 5,300 Activity Cost Pool Labor-related (DLHS) Purchase orders (orders) Parts management (part types) Board etching (boards) General factory (MHs) 24 33 37 350 3,600 Using the ABC data, determine the total amount of overhead cost assigned to each product.

Answer 1

Answers

• [1]

	Activity Rates
Labor-related	$                        7.00	per DLHs
Purchase orders	$                      30.00	per orders
Parts management	$                    860.00	per part types
Board etching	$                      40.00	per boards
General factory	$                      10.00	per MHs

Activity Cost Pool	Activity Measure	Expected Overhead cost	Expected Activity		Activity Rates
		[A]	[B]		[A/B]
Labor-related	Direct labor-hours	$                241,500.00	34,500	DLHs	$                                                         7.00	per DLHs
Purchase orders	Number of orders	$                     6,060.00	202	orders	$                                                       30.00	per orders
Parts management	Number of part types	$                  90,300.00	105	part types	$                                                     860.00	per part types
Board etching	Number of boards	$                  69,600.00	1,740	boards	$                                                       40.00	per boards
General factory	Machine-hours	$                193,000.00	19,300	MHs	$                                                       10.00	per MHs

• [2]

	Product A	Product B	Product C	Product D
Labor-related (DLHs)	$        39,900.00	$            137,900.00	$    34,300.00	$              29,400.00
Purchase orders (orders)	$          1,590.00	$                    720.00	$          990.00	$                2,760.00
Parts management (part types)	$        32,680.00	$              11,180.00	$    31,820.00	$              14,620.00
Board etching (boards)	$        14,000.00	$              29,600.00	$    26,000.00	$                             -
General factory (MHs)	$        36,000.00	$              84,000.00	$    20,000.00	$              53,000.00

	Expected Activity	Activity Rates		Overhead Allocated
Activity Cost Pool	Product A
Labor-related (DLHs)	5,700	$                             7.00	per DLHs	$         39,900.00
Purchase orders (orders)	53	$                           30.00	per orders	$           1,590.00
Parts management (part types)	38	$                        860.00	per part types	$         32,680.00
Board etching (boards)	350	$                           40.00	per boards	$         14,000.00
General factory (MHs)	3,600	$                           10.00	per MHs	$         36,000.00
Amount of Overhead Cost assigned				$       124,170.00
	Expected Activity	Activity Rates		Overhead Allocated
Activity Cost Pool	Product B	[A/B]
Labor-related (DLHs)	19,700	$                             7.00	per DLHs	$       137,900.00
Purchase orders (orders)	24	$                           30.00	per orders	$               720.00
Parts management (part types)	13	$                        860.00	per part types	$         11,180.00
Board etching (boards)	740	$                           40.00	per boards	$         29,600.00
General factory (MHs)	8,400	$                           10.00	per MHs	$         84,000.00
Amount of Overhead Cost assigned				$       263,400.00
	Expected Activity	Activity Rates		Overhead Allocated
Activity Cost Pool	Product C	[A/B]
Labor-related (DLHs)	4,900	$                             7.00	per DLHs	$         34,300.00
Purchase orders (orders)	33	$                           30.00	per orders	$               990.00
Parts management (part types)	37	$                        860.00	per part types	$         31,820.00
Board etching (boards)	650	$                           40.00	per boards	$         26,000.00
General factory (MHs)	2,000	$                           10.00	per MHs	$         20,000.00
Amount of Overhead Cost assigned				$       113,110.00
	Expected Activity	Activity Rates		Overhead Allocated
Activity Cost Pool	Product D	[A/B]
Labor-related (DLHs)	4,200	$                             7.00	per DLHs	$         29,400.00
Purchase orders (orders)	92	$                           30.00	per orders	$           2,760.00
Parts management (part types)	17	$                       860.00	per part types	$         14,620.00
Board etching (boards)	-	$                           40.00	per boards	$                        -
General factory (MHs)	5,300	$                           10.00	per MHs	$         53,000.00
Amount of Overhead Cost assigned				$         99,780.00