Question
In: Accounting
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 1 year agoRelated Solutions
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