Question

Pillar Pillar Manufacturing Inc. ("the company") makes pillars, and is considering bidding on a job In order to submit this bid, the company needs to calculate the total cost of performing this job. Financial details for the proposed job are as follows:

Number of inspections

160

Number of machine hours

1,200

Number of direct labour hours

4,000

Direct materials

$42,000

Direct labour

$32,000

Number of material moves

50

The company has three different categories of overhead. The overhead costs for each of the categories for the next year are as follows:

Costs

Cost Driver

Expected Activity

Materials handling

$120,000

Material moves

8,000

Maintenance

$360,000

Machine hours

24,000

Inspection

$14,000

Inspections

4,000

The company applies overhead using a predetermined overhead rate based upon a budgeted direct labour hours of 100,000.

Using the above information answer all of the following questions.

Question 20 (1 point)

Question 20 options:

If the company used activity-based costing, calculate the total overhead cost that would be assigned for material handling to the job

Question 21 (1 point)

Question 21 options:

If the company used activity-based costing, calculate the total overhead cost that would be assigned for maintenance to the job

Question 22 (1 point)

Question 22 options:

If the company used activity-based costing, calculate the total overhead cost that would be assigned for inspections to the job

Question 23 (1 point)

Question 23 options:

If the company used activity-based costing, calculate the total of material cost + direct labour cost that would be assigned to the job

Question 24 (1 point)

Question 24 options:

If the company used activity-based costing, calculate the total cost that would be assigned to the job

Question 25 (2 points)

Question 25 options:

If the company allocated overhead to the job using a plantwide overhead rate, calculate the total overhead cost assigned to the job

Question 26 (1 point)

Question 26 options:

If the company allocated overhead to the job using a plantwide overhead rate, calculate the total cost assigned to the job

Question 27 (1 point)

It would not be appropriate to adopt an ABC policy if which of the following were true:

Question 27 options:

a)

All products consumed resources in a similar manner.

b)

The cost of developing individual cost pools was too great.

c)

All of the other answers are correct.

d)

The products being produced were quite similar.

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Answer 1

Solution

Pillar Pillar Manufacturing Inc

Q20.

Calculation of overhead cost that would be assigned for material handling to the job using the Activity Based Costing:

Material handling cost = $120,000

Material moves = 8,000

Material handling activity rate = 120,000/8,000 = $15 per move

Material moves for the job = 50

Material handling cost assigned to the job =$15 x 50 = $750

Q21. Calculation of overhead cost that would be assigned for maintenance to the job using the Activity Based Costing:

Maintenance cost = $360,000

Machine hours = 24,000

Maintenance activity rate = 360,000/24,000 = $15 per MH

Machine hours for the job = 1,200

Maintenance cost assigned to the job = $15 x 1,200 MH

= $18,000

Q22. Calculation of overhead cost that would be assigned for inspections to the job using the Activity Based Costing:

Inspection cost = $14,000

Inspections = 4,000

Inspection activity rate = 14,000/4,000 = $3.50 per inspection

Inspections for the job = 160

Inspection cost assigned to the job = $3.50 x 160 = $560

Q23. Total of material cost + direct labor cost that would assigned to the job:

Direct material = $42,000

Direct labor = $32,000

Total of material cost + direct labor cost = 42,000 + 32,000 = $74,000

Q24. If the company uses activity based costing, computation of the total cost assigned to the job:

Total cost assigned to the job:

Direct materials $42,000

Direct labor = $32,000

Overhead costs assigned:

Materials handling = $750

Maintenance = $18,000

Inspections = $560

Total cost assigned = $93,310

If the company uses activity based costing, the total cost assigned to the job would be = $93,310

Q25. If the company allocated overhead to the job using a plantwide overhead rate, calculate the total overhead cost assigned to the job:

Plantwide overhead rate = total overhead cost/budgeted direct labor hours

Total overhead cost –

Materials handlings = $120,000

Maintenance = $360,000

Inspections = $14,000

Total overhead cost = $494,000

Budgeted direct labor hours = 100,000

Plantwide overhead rate = $494,000/100,000 = $4.94 per direct labor hour

Direct labor hours needed for the job = 4,000

Overhead cost assigned to the job using plantwide overhead rate = $4.94 x 4,000 DLH

= $19,760

Q26. If the company allocated overhead to the job using a plantwide overhead rate, calculation of the total cost assigned to the job:

Total cost assigned to the job –

Direct materials = $42,000

Direct labor = $32,000

Overhead assigned = $19,760

Total cost assigned = $93,760

Total cost assigned to the job using a plantwide overhead rate = $93,760

Q27. It would not be appropriate to adopt an ABC policy if which of the following were true:

Answer - Option C. All of the other answers are correct.

a. All the products consume resources in a similar manner.

b. The cost of developing individual cost pools was too great.

D the products being produced were quite similar.