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Mudcat Corporation has four categories of overhead, with expected costs for next year as follows.                  ...

Mudcat Corporation has four categories of overhead, with expected costs for next year as follows.

                  Maintenance                                                                        $750,000

                  Materials Handling                                                                 260,000

                  Inspection                                                                              470,000

                  Setups                                                                                   245,000

Job #58 is scheduled for next year and has the following estimates:

                  Direct materials                                        $48,000

                  Direct labor (2,000 hours)                         $56,000

                  Number of inspections                                      95

                  Number of setups                                             88

                  Number of machine hours                            4,500

                  Number of materials moves                             185

Sixty thousand direct labor hours are budgeted for next year. Expected activity for the activity-based cost drivers that could be used are:

                  Machine hours                                           34,000

                  Material moves                                          18,000

                  Setups                                                       31,000

                  Quality inspections                                     37,000

Determine the total cost of Job #58 if activity-based costing is used: $ ___________________

Solutions

Expert Solution

Computation of total cost for Job #58
Particulars Amount in $
Direct materials cost                       48,000
Direct labour cost                       56,000
Inspection cost (95 inspections @ $12.70)                         1,207 Refer Note 1
Setup cost (88 setups @ $7.90)                            695 Refer Note 1
Maintenance cost (4500 machine hours @ $22.06)                       99,270 Refer Note 1
Materials handling cost (185 material moves @ $14.44)                         2,671 Refer Note 1
Total cost for Job #58                   2,07,843
Note 1:
Calculation of cost-driver rates
Activity Cost driver Total budgeted activity cost ($) - A Budgeted no. of cost drivers - Budgeted cost-driver rate (A / B)
Maintenance Machine hours                   7,50,000                  34,000                             22.06
Materials handling Material moves                   2,60,000                  18,000                             14.44
Inspection Quality inspections                   4,70,000                  37,000                             12.70
Setup Setups                   2,45,000                  31,000                                7.90

ekkarill92 answered 1 year ago
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