Question

Sultan Company uses an activity-based costing system.

At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:

Activity Cost Pool	Activity Measure	Expected Overhead Cost			Expected Activity
Labor-related	Direct labor-hours	$	317,600		39,700		DLHs
Purchase orders	Number of orders	$	9,900		220		orders
Parts management	Number of part types	$	67,890		93		part types
Board etching	Number of boards	$	76,000		1,900		boards
General factory	Machine-hours	$	237,600		21,600		MHs

Required:

1. Compute the activity rate for each of the activity cost pools.

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)		6,300			23,700			4,600			5,100
Purchase orders (orders)		70			27			40			83
Parts management (part types)		28			13			32			20
Board etching (boards)		580			700			620			0
General factory (MHs)		3,900			8,900			3,500			5,300

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

1. Compute the activity rate for each of the activity cost pools.

Activity Cost Pool	Activity Rate
Labor-related		per DLH
Purchase Orders		per order
Parts Management		per part type
Board etching		per board
General Factory		per MH

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

	Overhead Cost Assigned
Activity Cost Pool	Product A	Product B	Product C	Product D
Labor-related (DLHs)
Purchase Orders (orders)
Parts Management (part types)
Board Etching (boards)
General Factory (MHs)
Total

Answer 1

1. Activity rate for each of the activity cost pools [Refer working note 1]

Activity Cost Pools	Activity Rate
Labor-related	$8	per DLH
Purchase orders	$45	per order
Parts management	$730	per part type
Board etching	$40	per board
General factory	$11	per MH

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2. Total amount of overhead cost assigned to each product   

Activity Cost Pool	Product A [Refer working note 2]	Product B [Refer working note 3]	Product C [Refer working note 4]	Product D [Refer working note 5]
Labor-related (DLHs)	$50,400	$189,600	$36,800	$40,800
Purchase orders (orders)	$3,150	$1,215	$1,800	$3,735
Parts management (part types)	$20,440	$9,490	$23,360	$14,600
Board etching (boards)	$23,200	$28,000	$24,800	$0
General factory (MHs)	$42,900	$97,900	$38,500	$58,300

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