Question

Problem 04-3A Applying activity-based costing LO P1, P3, A1, A2, C3 Skip to question [The following information applies to the questions displayed below.] 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 $ 380,000 Polishing $ 205,000 Product modification 550,000 Providing power $ 245,000 System calibration 560,000 Additional information on the drivers for its production activities follows. Grinding 14,000 machine hours Polishing 14,000 machine hours Product modification 1,400 engineering hours Providing power 20,000 direct labor hours System calibration 400 batches Job 3175 Job 4286 Number of units 160 units 2,000 units Machine hours 300 MH 3,000 MH Engineering hours 28 eng. hours 22 eng. hours Batches 25 batches 75 batches Direct labor hours 510 DLH 4,590 DLH Problem 04-3A 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.)

Answer 1

Craft Pro
Answer 2, 3 and 4	A	B		C=A/B	D	E=D*C	F	G=F*C	Note
					Job 3175		Job 4206
Activity cost pool	Overhead Cost	Activity Drivers	ABC rates	Activity Driver Incurred	Overhead Assigned	Activity Driver Incurred	Overhead Assigned
Grinding and Polishing	585,000.00	14,000.00	Machine Hours	41.79	300.00	12,537.00	3,000.00	125,370.00
Product Modification	550,000.00	1,400.00	Engineering Hours	392.86	28.00	11,000.00	22.00	8,643.00
Providing Power	250,000.00	20,000.00	Direct Labor Hours	12.50	510.00	6,375.00	4,590.00	57,375.00
System Calibration	560,000.00	400.00	Batches	1,400.00	25.00	35,000.00	75.00	105,000.00
Total Cost assigned	1,945,000.00					64,912.00		296,388.00	H
Number of units						160.00		2,000.00	I
Average overhead cost per unit						405.70		148.19	J=H/I