Question

Hamilton Manufacturing Company
Direct materials	175,000
Materials handling	35,000
Grinding	300,000
Polishing	100,000
Product Modification	500,000
Providing Power	225,000
System Calibration	400,000
Machine Hours	37,500	units
Direct Labor Hours	15,000
Engineering hours	1,200
Batches	200
Materials handling based on direct material cost
Grinding based on machine hours
Polishing based on machine hours
Product Modification based on engineering hours
Providing Power based on direct labor hours
System Calibration based on batches
Job 231
Completed	1,675	units
Direct Materials	18,500
Direct labor hours	350
Machine hours	755
Engineering hours	245
Batches	35
Using the ABC Method find the activity overhead rates.
Once you have those activity rates find the total cost of Job 231 including materials and the cost per unit

Answer 1

A. Computation of activity overhead rates :-
	Activity cost pool	Activity measures (Cost Drivers)	Estimated Overhead Cost	Expected Activity	Activity rate
				Total
	a	b	c	f	g = c/f
	Materials handling	Direct material cost	$               35,000	175,000	$ 0.20	$ of Direct material cost
	Grinding	Machine hours	$            300,000	37,500	$ 8.00	per machine hour
	Polishing	Machine hours	$            100,000	37,500	$ 2.67	per machine hour
	Product Modification	Engineering hours	$            500,000	1,200	$ 416.67	per Engineering hour
	Providing Power	Direct labor hours	$            225,000	15,000	$ 15.00	per Direct labor hour
	System Calibration	Batches	$            400,000	200	$ 2,000.00	per batch
	Total Cost		$         1,560,000
B. Computation of the total cost of Job 231 including materials and the cost per unit:-
	Overhead Assigned	Activity Driver			Activity rate	Total Overhead Cost
	a	b			c	d = b×c
	Job 231
	Materials handling	18,500	Direct material cost		$ 0.20	$ 3,700
	Grinding	755	Machine hours		$ 8.00	$ 6,040
	Polishing	755	Machine hours		$ 2.67	$ 2,013
	Product Modification	245	Engineering hours		$ 416.67	$ 102,083
	Providing Power	350	Direct labor hours		$ 15.00	$ 5,250
	System Calibration	35	Batches		$ 2,000.00	$ 70,000
					Total	$ 189,087
			Job 231
	No. of units completed		1675
			Total	Per Unit
	Direct Material Cost		$               18,500	$                 11.04
	Overhead Cost		$            189,087	$               112.89
	Total Cost		$            207,587	$               123.93

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