Solution-Compute the pool rates for the different activities

Compute the pool rates for the different activities

Assignment Help Managerial Accounting

Reference no: EM13449


1. Ernest, Inc. has identified the following overhead costs and cost drivers for next year:
Overhead Item	Expected Cost	Cost Driver	Quantity	Activity rate
Setup costs	$320,000	Number of setups	4,000
Ordering costs	120,000	Number of orders	15,000
Maintenance	480,000	Machine hours	125,000
Power	40,000	Kilowatt hours	200,000
Total overhead	$960,000

The following are two of the jobs completed during the year:
	Job 320	Job 321
Direct materials	$ 19,200	$ 24,000		Overhead costs
Direct labor	$ 24,000	$ 30,000		Job 320	Job 321
			Setup costs
Units completed	1,600	2,000	Ordering costs
			Maintenance
Number of setups	12	10	Power
Number of orders	20	30	Total	-	-
Machine hours	400	600
Kilowatt hours	280	350

Required:
1. Complete the schedule above to compute the pool rates for the different activities.
2a. Compute the total job costs assigned to the each of the two jobs using the information provided. Assign overhead using the pool rates calculated in "a" above.
	Job 320	Job 321
Direct materials
Direct labor
Overhead costs
Total costs assigned

2b. Compute the unit cost for the two jobs.
Total Costs Assigned	-	-
Number of Units	1,600	2,000
Cost Per Unit	$ -	$ -

3. Assume instead of using ABC costing, the company used a traditional costing method that assigns overhead using a predetermined rate based on machine hours. Based on the original numbers, total overhead for the year is $960,000 and the total estimated machine hours are 125,000.
a. Compute the predetermined rate using the information in item 3.
	960,000.00
	125,000.00
b. Compute the total cost assigned to jobs 320 and 321 by substituting the traditional overhead for the ABC overhead that you computed in 2 above
Overhead assigned	Hours	Rate	Total
Job 320	400
Job 321	600

	Job 320	Job 321
Direct materials
Direct labor
Overhead costs
Total costs assigned	-	-

Reference no: EM13449

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Compute the pool rates for the different activities

Reference no: EM13449

Reference no: EM13449

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