Question

Problem 3-18B Cost flows and Unit Product Costs in Activity-Based Costing [LO2, LO3, LO4]

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Fisher Company uses activity-based costing to determine product costs for external financial reports. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:

Activity Cost Pool	Activity Measure	Expected Overhead Cost		Expected Activity
Labor-related	Direct labor-hours	$	382,800	23,200	DLHs
Purchase orders	Number of orders	$	131,560	5,720	orders
Material receipts	Number of receipts	$	137,280	2,080	receipts
Relay assembly	Number of relays	$	1,195,200	14,400	relays
General factory	Machine-hours	$	1,207,800	73,200	MHs

References

Section BreakProblem 3-18B Cost flows and Unit Product Costs in Activity-Based Costing [LO2, LO3, LO4]

38.

value:
5.00 points

Required information

Problem 3-18B Part 1

Required:

1.	Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)

References

eBook & Resources

WorksheetDifficulty: 3 HardLearning Objective: 03-03 Compute product costs using activity-based costing.

Problem 3-18B Part 1Learning Objective: 03-02 Compute activity rates for an activity-based costing system.Learning Objective: 03-04 Contrast the product costs computed under activity-based costing and conventional costing methods.

39.

value:
5.00 points

Required information

Problem 3-18B Part 2

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)	7,800	1,800	8,800	4,800
Production orders (orders)	1,000	1,060	1,300	2,360
Materials receipts (receipts)	480	840	340	420
Relay assembly (relays)	4,300	2,400	3,400	4,300
General factory (MHs)	16,800	26,800	17,800	11,800

   

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

Answer 1

Activity Cost pool	Expected O/H cost	Expected Activity(No`s)	Activity Rate
Labor related	382800	23200	16.5	per direct labor hour	(282500/23200)
Purchase orders	131560	5720	23	per order	(131560/5720)
Material Receipts	137280	2080	66	per receipt	(137280/2080)
Relay Assembly	1195200	14400	83	per relays	(1195200/14400)
General factory	1207800	73200	16.5	per machine hour	(1207800/73200)
		Product A		Product B		Product C		Product D
Activity cost pool	Per activity rate	Activity(Nos)	Total Cost(per activity rate* Nos)	Activity(Nos)	Total Cost(per activity rate* Nos)	Activity(Nos)	Total Cost(per activity rate* Nos)	Activity(Nos)	Total Cost(per activity rate* Nos)
Labor related	16.5	7800	128700	1800	29700	8800	145200	4800	79200
Purchase orders	23	1000	23000	1060	24380	1300	29900	2360	54280
Material Receipts	66	480	31680	840	55440	340	22440	420	27720
Relay Assembly	83	4300	356900	2400	199200	3400	282200	4300	356900
General factory	16.5	16800	277200	26800	442200	17800	293700	11800	194700
Total Cost			$817,480.00		$750,920.00		$773,440.00		$712,800.00