Question

Required information

Problem C-1A Applying activity-based costing LO P1, P2, A1,

[The following information applies to the questions displayed below.]

Craftmore Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity	Indirect Labor				Indirect Materials				Other Overhead
Grinding		$	330,000
Polishing						$	135,000
Product modification			500,000
Providing power										$	255,000
System calibration			590,000

Additional information on the drivers for its production activities follows.

Grinding and Polishing	9,000	machine hours
Product modification	2,200	engineering hours
Providing power	17,000	direct labor hours
System calibration	200	batches

	Job 3175		Job 4286
Number of units	180	units	2,250	units
Machine hours	300	MH	3,000	MH
Engineering hours	29	eng. hours	26	eng. hours
Batches	25	batches	75	batches
Direct labor hours	440	DLH	3,960	DLH
2. Determine overhead costs to assign to the following jobs using ABC

Job 3175	----------Activity Rate----------		Activity Driver Incurred	Overhead Assigned
Grinding and Polishing
Product modification
Providing power
System calibration
Job 4286	----------Activity Rate----------		Activity Driver Incurred	Overhead Assigned
Grinding and Polishing
Product modification
Providing power
System calibration

Answer 1

Calculation of Activity rates
Activity Cost Pool	Overhead Cost	Activity Driver	Expected Activity (B)	Activity rate (A/B)
Grinding	Number of Machine hours	$   330,000.00	9,000	$            36.67	Per Machine hours
Product Modification	Number of Engineering Hours	$   500,000.00	2200	$         227.27	Per Engineering Hours
Providing Power	Number of Direct labor hours	$   255,000.00	17,000	$            15.00	Per Direct labor hours
System calibration	Number of Batches	$   590,000.00	200	$      2,950.00	Per Batch
Total		$ 1,675,000.00

Job 3175	----------Activity Rate----------		Activity Driver Incurred	Overhead Assigned
Grinding and Polishing	$           36.67	Per machine hour	300	$     11,000.00
Product modification	$          227.27	Per Engineering Hours	29	$        6,590.91
Providing power	$           15.00	Per Direct labor hours	440	$        6,600.00
System calibration	$       2,950.00	Per Batch	25	$     73,750.00

Job 4286	----------Activity Rate----------		Activity Driver Incurred	Overhead Assigned
Grinding and Polishing	$           36.67	Per machine hour	3000	$   110,000.00
Product modification	$          227.27	Per Engineering Hours	26	$        5,909.09
Providing power	$           15.00	Per Direct labor hours	3960	$     59,400.00
System calibration	$       2,950.00	Per Batch	75	$   221,250.00