Question

In: Accounting

County Cleats Co. manufactures cleats for baseball shoes. It has outlined the following overhead cost drivers:...

County Cleats Co. manufactures cleats for baseball shoes. It has outlined the following overhead cost drivers:

Overhead Cost Pool

Cost Driver

Overhead Cost $

Budgeted Level for Cost Driver

Quality Control

# of inspections

78,000

1,200

Machine Time

Machine hours

188,000

800

Materials Handling

# of Batches

1,200

50

Miscellaneous Overhead Cost

Direct labor hours

59,000

5,000

County Cleats Co. has an order for 30,000 pairs of cleats from Dicks Sporting Goods and it has the following production requirements:

Number of Inspections

375

Number of Machine hours

220

Number of Batches

8

Direct Labor Hours

840

Using activity-based costing and the information above, compute the overall overhead cost of the order for Dicks Sporting Goods and the overhead cost per unit i.e. for a pair of cleats.
if direct materials and direct labor are $15 and $8 per pair, respectively, and the company wants a profit margin of 25%, how much will each pair of cleats cost Dicks Sporting Goods?

Expert Solution

1	Overhead cost
	Quality Control (375 x $65.00)	$24,375
	Machine Time (220 x $235.00)	$51,700
	Material Handling (8 x $24.00)	$192
	Miscellaneous Overhead Cost (840 x $11.80)	$9,912
	Total overhead cost	$86,179
	Pairs of cleats	30,000
	Overhead cost per unit	$2.87

2	Direct materials	$15.00
	Direct labor	$8.00
	Overhead	$2.87
	Total Cost	$25.87
	Add: Profit Margin ($25.87 x 25%)	$6.47
	Each pair of cleats cost Dicks Sporting Goods	$32.34


	Working
		Overhead Cost Budgeted	Buegetd Activity	Activity Rate
	Quality Control	$78,000	1,200	$65.00
	Machine Time	$188,000	800	$235.00
	Material Handling	$1,200	50	$24.00
	Miscellaneous Overhead Cost	$59,000	5,000	$11.80

ekkarill92 answered 1 year ago

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