Question

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Grass Inc. identified the following overhead activities, their respective costs, and their cost drivers to produce...

Grass Inc. identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of lawn mowerss

Type of Mowers

  Activity (Cost)

Cost Driver

Deluxe

Moderate

Economy

  Machine maintenance ($545,600)

  Number of machine hours

220

780

1,200

  Setups ($416,000)

  Number of setups

29

13

6

  Quality control ($203,322)

  Number of inspections

15

34

45

  Rent ($408,100)

  Number of square feet

420

180

110

The company produced the following number of lawn mowers during the prior year.

Deluxe

Moderate

Economy

500

1,440

1,970

1. Grass Inc. currently allocates all overhead costs based on machine hours. Determine the overhead cost per mower for the deluxe type. (choose the closest number).

2. Determine the overhead cost for one unit of economy mower, assuming that Grass Inc. uses an activity-based costing system. (choose the closest number)

Solutions

Expert Solution

Type of Mowers
  Activity (Cost) Activity Costs Cost Driver Deluxe Moderate Economy Total Cost Driver
  Machine maintenance ($545,600) 545600   Number of machine hours 220 780 1,200 2200
  Setups ($416,000) 416000   Number of setups 29 13 6 48
  Quality control ($203,322) 203322   Number of inspections 15 34 45 94
  Rent ($408,100) 408100   Number of square feet 420 180 110 710
1573022
1 Total Overheads 1573022 A
Total Machine Hours 2200 B
Overhead Per MH 715.01 A/B
Allocation of Overhead to Deluxe:
Machine Hours 220 A
Overhead Per MH 715 B
Total Allocation 157302 A*B
Total Units of Deluxe 500
Overhead Per Unit 315
2 Activity Based System:
A B A/B
  Activity (Cost) Activity Costs Cost Driver Deluxe Moderate Economy Total Cost Driver Cost Per Driver
  Machine maintenance ($545,600) 545600   Number of machine hours 220 780 1,200 2200 248
  Setups ($416,000) 416000   Number of setups 29 13 6 48 8,667
  Quality control ($203,322) 203322   Number of inspections 15 34 45 94 2,163
  Rent ($408,100) 408100   Number of square feet 420 180 110 710 575
1573022
Economy Economy
Allocation of Overhead to Deluxe: Cost Drivers Cost Per Driver Overhead Costs
  Machine maintenane 1,200 248 297600
  Setups 6 8,667 52000
  Quality control 45 2,163 97335
  Rent 110 575 63227
Total 510162
Total Units of Economy 1970
Overhead Per Unit 258.97

ekkarill92 answered 7 months ago
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