Second-Stage Allocation to an Order
Transvaal Mining Tools Ltd. of South Africa makes specialty tools used in the mining industry. The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below:
Activity Cost Pool | Activity Measure | Activity Rate | |
Order size | Number of direct labor-hours | R17.60 | per direct labor-hour* |
Customer orders | Number of customer orders | R360 | per customer order |
Product testing | Number of testing hours | R79 | per testing hour |
Selling | Number of sales calls | R1,494 | per sales call |
*(The currency in South Africa is the rand, denoted here by R.)
The managing director of the company would like information concerning the cost of a recently completed order for hard-rock drills. The order required 150 direct labor-hours, 18 hours of product testing, and three sales calls.
Required:
Prepare a report summarizing the overhead costs assigned to the order for hard-rock drills. What is the total overhead cost assigned to the order?
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