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:

Activity Cost Pool	Activity Measure	Expected Overhead Cost			Expected Activity
Labor-related	Direct labor-hours	$	311,500		44,500		DLHs
Purchase orders	Number of orders	$	8,840		221		orders
Parts management	Number of part types	$	71,280		99		part types
Board etching	Number of boards	$	63,700		1,820		boards
General factory	Machine-hours	$	148,000		14,800		MHs

The expected activity for the year was distributed among the company’s four products as follows:

	Expected Activity
Activity Cost Pool	Product A			Product B			Product C			Product D
Labor-related (DLHs)		6,800			27,300			4,600			5,800
Purchase orders (orders)		51			29			49			92
Parts management (part types)		34			17			33			15
Board etching (boards)		500			770			550			0
General factory (MHs)		2,100			6,300			2,400			4,000

Using the ABC data, determine the total amount of overhead cost assigned to each product.

Answer 1

1]	CALCULATION OF ACTIVITY RATES:
	Activity Cost Pool	Activity Measure	Expected	Expected Activity
	Overhead Cost	Activity Rate
	Labor-related	Direct labor-hours	311,500	44,500	$ 7.00	DLHs
	Purchase orders	Number of orders	8,840	221	$ 40.00	orders
	Parts management	Number of part types	71,280	99	$720.00	part types
	Board etching	Number of boards	63,700	1,820	$ 35.00	boards
	General factory	Machine-hours	148,000	14,800	$ 10.00	MHs
2]	ASSIGNMENT OF OVERHEAD:
		Expected Activity		Overhead Assigned
	Activity Cost Pool	Product A	Product B	Product C	Product D	Activity Rate	Product A	Product B	Product C	Product D
	Labor-related (DLHs)	6,800	27,300	4,600	5,800	$ 7.00	$47,600	$          191,100	$         32,200	$        40,600
	Purchase orders (orders)	51	29	49	92	$ 40.00	$ 2,040	$              1,160	$           1,960	$          3,680
	Parts management (part types)	34	17	33	15	$720.00	$24,480	$            12,240	$         23,760	$        10,800
	Board etching (boards)	500	770	550	0	$ 35.00	$17,500	$            26,950	$         19,250	$                 -
	General factory (MHs)	2,100	6,300	2,400	4,000	$ 10.00	$21,000	$            63,000	$         24,000	$        40,000
	Total overhead assigned for each product				$         112,620	$          294,450	$       101,170	$        95,080