Balco Inc. uses ABC costing to determine product costs for reporting. At the start of the...

Balco Inc. uses ABC costing to determine product costs for reporting. At the start of the year,
management made the following cost and activity estimates for the company's 4 activity costs pools.

Activity/Cost Pool	Activity Measure	Estimated Overhead Cost	Expected Activity
Labour Related	DLH	$184,925	28,460 DLH
Purchase Orders	# of orders	$52,700	625 Orders
Widget Assembly	# of widgets	$495,000	11,100 widgets
General Factory	Machine Hours	$1,148,000	82,500 MH

Required: Compute the Activity Rate (pre-determined OH Rate) for all of the activity/cost pools.

During the year, actual overhead cost and activity were recorded as follows:

Activity/Cost Pool	Acutal Overhead Cost	Actual Activity
Labour Related	$187,575	28,120 DLH
Purchase Orders	$51,950	629 Orders
Widget Assembly	$497,500	11,210 widgets
General Factory	$1,082,000	80,180 MH

Required: Determine the OH applied to production during the year and show whether it is
over or under applied for each individual activity and an overall total.

Expert Solution

The Activity rate (pre-determined OH Rate)
Activity/Cost Pool	Activity Measure	Estimated Overhead Cost (1)	Expected Activity (2)	Activity rate (1)/(2)
Labour Related	DLH	184,925	28,460	6.50	per DLH
Purchase Orders	# of orders	52,700	625	84.32	per Order
Widget Assembly	# of widgets	495,000	11,100	44.59	per widget
General Factory	Machine Hours	1,148,000	82,500	13.92	per MH

Overhead applied to production during the year
Activity/Cost Pool	Actual activity (1)	Activity rate (2)	Applied Oveahead (1)x(2)	Actual Overhead Cost	Under-applied or Overapplied
Labour Related	28,120	6.50	182,780	187,575	(4,795)	Under-applied
Purchase Orders	629	84.32	53,037	51,950	1,087	Over-applied
Widget Assembly	11,210	44.59	499,854	497,500	2,354	Over-applied
General Factory	80,180	13.92	1,116,106	1,082,000	34,106	Over-applied

ekkarill92 answered 1 year ago

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