Prepare a report showing the overhead cost of the order for hard rock drills according to the ABC system. What is the total overhead cost assigned to the order?

Ace Mining Tools Ltd. of Calgary makes specialty tools used in the mining industry. The company uses an ABC system for internal decision making. The company has four activity cost pools, as listed below:

Activity Cost Pool	Activity Measure	Activity Rate
Order size	Direct labour-hours	$17.60
Customer orders	Customer orders	$360.00
Product testing	Testing hours	$79.00
Selling	Sales calls	$750.00

The managing director of the company would like information concerning the cost of a recently completed order for hard-rock drills. The order required 100 direct labour-hours, 20 hours of product testing, and five sales calls.

Required:

Expert Solution

Activity Cost Pool	(a) Activity Rate		(b) Activity		(a) × (b) ABC Cost
Order size	$18	per direct labour-hour	$100	direct labour-hours	$1,760
Customer orders	360	per customer order	$1	customer order	360
Product testing	$79	per product testing hour	$20	product testing hours	1,580
Selling	$750	per sales call	5	sales calls	3,750
Total					$7,450

According to these calculations, the total overhead cost of the order is $7,450.

Renze Joy Candido answered 2 years ago

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Prepare a report showing the overhead cost of the order for hard rock drills according to the ABC system. What is the total overhead cost assigned to the order?

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