Question

Required 1. Olmo, Inc., manufactures and sells two products: Product K0 and Product H9. The annual production and sales of Product of K0 is 700 units and of Product H9 is 700 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

Activity Cost Pools	Activity Measures	Estimated Overhead Cost			Expected Activity
					Product K0	Product H9	Total
Labor-related	DLHs	$	549,308		5,600	2,800	8,400
Production orders	orders		52,319		800	400	1,200
Order size	MHs		834,916		3,000	3,300	6,300
		$	1,436,543

The overhead applied to each unit of Product K0 under activity-based costing is closest to?

Required 2. Olmo, Inc., manufactures and sells two products: Product T8 and Product P4. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product T8	Product P4	Total
Labor-related	DLHs	$	109,500	2,000	1,000	3,000
Production orders	orders		51,640	1,100	600	1,700
Order size	MHs		807,690	3,400	3,600	7,000
		$	968,830

The total overhead applied to Product P4 under activity-based costing is closest to?

Answer 1

Answers may Vary subject to Rounding Figures, Comment if Any Doubts. Thank You

or Provide the Options will sugeest the Answers.

1)
Activity cost pool	Activity Measure	Estimated Overhead cost (a)	/	Expected Activity	=	Activity rate (c=a/b)	x	Product K0 Activity	Overhead Applied to K0
Labor related	DLH's	5,49,308	/	8,400	=	65.39	x	5,600	366184
Production orders	Orders	52319	/	1,200	=	43.6	x	800	34880
Order size	MHs	834916	/	6,300	=	132.53	x	3,000	397590
Total									798654
						Overhead cost per unit       = Overhead Applied / Total Units        = $ 798,654 / 700 Units        = $ 1,140.93 per Unit	=	$ 1,140.93 per Unit
2)
Activity cost pool	Activity Measure	Estimated Overhead cost (a)	/	Expected Activity	=	Activity rate (c=a/b)	x	Product K0 Activity	Overhead Applied to K0
Labor related	DLH's	1,09,500	/	3,000	=	36.5	x	1,000	36500
Production orders	Orders	51,640	/	1,700	=	30.38	x	600	18228
Order size	MHs	8,07,690	/	7,000	=	115.38	x	3,600	415368
Total									470096
						Total overhead applied to Product P4	=	$ 470,096