Question

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity	Indirect Labor				Indirect Materials				Other Overhead
Grinding	$	390,000
Polishing					$	125,000
Product modification		450,000
Providing power									$	240,000
System calibration		500,000

Additional information on the drivers for its production activities follows.

Grinding	17,000	machine hours
Polishing	17,000	machine hours
Product modification	1,300	engineering hours
Providing power	20,000	direct labor hours
System calibration	1,100	batches

	Job 3175		Job 4286
Number of units	140	units	1,750	units
Machine hours	500	MH	5,000	MH
Engineering hours	33	eng. hours	24	eng. hours
Batches	15	batches	45	batches
Direct labor hours	410	DLH	3,690	DLH

Required:
1. Classify each activity as unit level, batch level, product level, or facility level.

Required:
2, 3 & 4. Compute the activity overhead rates using ABC. Combine the grinding and polishing activities into a single cost pool. Determine overhead costs to assign to the above jobs using ABC. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286? (Round your activity rate and average overhead cost per unit to 2 decimal places. Round "overhead assigned" to the nearest whole dollar.)

5. If the company uses a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286? (Do not round intermediate calculations. Round "OH Cost per unit" answers to 2 decimal places.)

Answer 1