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Adria Company recently implemented an activity-based costing system. At the beginning of the year, management made...

Adria Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:

Activity Cost Pool Activity
Measure		 Expected
Overhead Cost		 Expected
Activity
Labor-related Direct labor-hours $ 52,000 6,500 DLHs
Purchase orders Number of orders $ 13,000 2,600 orders
Material receipts Number of receipts $ 11,200 800 receipts
Relay assembly Number of relays $ 16,000 1,600 relays
General factory Machine-hours $ 342,000 38,000 MHs

2. 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) 2,750 850 2,275 625
Purchase orders (orders) 450 700 650 800
Materials receipts (receipts) 350 282 168 0
Relay assembly (relays) 240 240 240 880
General factory (MHs) 13,750 5,800 5,700 12,750

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

Product A
Product B
Product C
Product D   

Solutions

Expert Solution

Answer-

ADRIA COMPANY
TOTAL OVERHEAD COST
Activity based costing method
PARTICULARS Amount
$
Product A $155300
Product B $68848
Product C $77502
Product D $132550
Total overhead costs $434200

Explanation-

ADRIA COMPANY
TOTAL OVERHEAD COST
Activity based costing method
PARTICULARS PRODUCT A PRODUCT B PRODUCT C PRODUCT D
$ $ $ $
Labor related 2750 DLHs*$8 per DLHs =$22000 850 DLHs*$8 per DLHs =$6800 2275 DLHs*$8 per DLHs =$18200 625 DLHs*$8 per DLHs =$5000
Purchase orders 450 order*$5 per order= $2250 700 order*$5 per order= $3500 650 order*$5 per order= $3250 800 order*$5 per order= $4000
Materials receipts 350 receipts*$14 per receipts= $4900 282 receipts*$14 per receipts= $3948 168 receipts*$14 per receipts= $2352 0
Relay assembly 240 relay*$10 per relay = $2400 240 relay*$10 per relay = $2400 240 relay*$10 per relay = $2400 880 relay*$10 per relay = $8800
General factory 13750 MHs*$9 per MHs= $123750 5800 MHs*$9 per MHs= $52200 5700 MHs*$9 per MHs= $51300 12750 MHs*$9 per MHs= $114750
Total overhead costs $ 155300 68848 77502 132550
Activity based costing method
Activity Rate
Acivity cost pool Estimated overhad costs (a) Estimated cost driver Expected actvity (b) Activity rate (c=a/b)
$
Labor related 52000 Direct labor hours 6500 $8 per DLHs
Purchase orders 13000 Number of orders 2600 $5 per order
Materials receipts 11200 Number of receipts 800 $14 per receipts
Relay assembly 16000 Number of relays 1600 $10 per relay
General factory 342000 Machine hours 38000 $9 per MHs
Total $ 434200

ekkarill92 answered 2 years ago
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