Question

Snavely, Inc., manufactures and sells two products: Product E1 and Product A7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

	Expected Production	Direct Labor-Hours Per Unit	Total Direct Labor-Hours
Product E1	1,100	10.0	11,000
Product A7	400	5.0	2,000
Total direct labor-hours			13,000

The direct labor rate is $20.60 per DLH. The direct materials cost per unit for each product is given below:

	Direct Materials Cost per Unit
Product E1	$211.00
Product A7	$287.00

The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product E1	Product A7	Total
Labor-related	DLHs	$	139,700	11,000	2,000	13,000
Machine setups	setups		65,880	1,200	400	1,600
Order size	MHs		1,030,410	3,900	3,700	7,600
		$	1,235,990

The total overhead applied to Product E1 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Correct answer----------------$696,428

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Labor related	Number of DLH	$ 139,700	13000	$             10.75	Per DLH
Machine setup	Number of setup	$ 65,880	1600	$             41.18	Per setup
Order size	Number of MH	$ 1,030,410	7600	$          135.58	Per MH

.

Cost assigned to Product E1
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Labor related	$           10.75	11,000.00	$ 118250.00
Machine setup	$           41.18	1,200.00	$ 49,416.00
Order size	$        135.58	3,900.00	$ 528762.00
Total Overheads assigned			$       696,428.00