fuller company uses abc to account for its chrome wheel manufacturing process

Expert Solution

Requirement 1: Compute cost allocation rate for each activity

Formula: $ \frac{\texttt{Manufacturing overheads}}{\texttt{Allocation base}} $


	Manufacturing Overheads	Allocation Base		Activity Cost Allocation Rate
Material handling	$12,000	3000	parts	$4	per part
Machine Setups	$3,400	10	setups	$340	per setup
Insertion of Parts	$48,000	3000	parts	$16	per part
Finishing	$80,000	2000	direct labor hours	$40	per hour
Total	$143,400.00

Requirement 2:

Formula:$ {\texttt{Activity cost allocation rate}}\times {\texttt{Allocation base}} $

Requirement 2: Compute manufacturing overhead cost for the JOB 420
Activity	Activity Cost Allocation Rate		Allocation base		MOH Assigned
Material handling	$4	per part	200	Parts	$800
Machine Setups	$340	per setup	2	Setups	$680
Insertion of Parts	$16	per part	200	Parts	$3,200
Finishing	$40	per hour	130	direct labor hours	$5,200
Total					$9,880

Requirement 3: Formula:$ {\texttt{Activity cost allocation rate}}\times {\texttt{Allocation base}} $ Compute manufacturing overhead cost for the JOB 510
	Activity Cost Allocation Rate		Allocation base		MOH Assigned
Material handling	$4	per part	425	Parts	$1,700
Machine Setups	$340	per setup	4	Setups	$1,360
Insertion of Parts	$16	per part	425	Parts	$6,800
Finishing	$40	per hour	350	direct labor hours	$14,000
Total					$23,860

1. Cost allocation rate for each activity is calculated.

2. Manufacturing overhead cost assigned to the JOB 420 is $9880

3. Manufacturing overhead cost assigned to the JOB 420 is $23860

Navya Chandra answered 4 years ago

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