How much overhead should be applied to customer order

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Reference no: EM133422

Question :

Wake Construction installs and manufactures standard and custom-made cabinetry for residential homes. Last year, the company incurred $200,000 in overhead costs. After executing activity-based costing (ABC), the company's accountant identified the subsequent related information:

Activity Allocation Base Proportion of Overhead Cost

Material delivery and handling   Number of deliveries     30%

Inspections         Number of inspections  25%

Supervision        Hours of supervisor time              20%

Purchasing          Number of purchase orders        25%

The number of activities for standard and custom-made cabinets is as follows:

Standard              Custom-made

Number of deliveries     200         100

Number of inspections  600         400

Hours of supervisor time              1,800     2,200

Number of purchase orders        1,000     1,000

In the past year, Wake received a customer order for a set of custom-made cabinets that would need the following:

Direct labor cost (25 hours at $15 per hour)          $375

Direct materials (wood) (900 ft at $3.00 per foot)              $2,700

Number of deliveries     3

Number of inspections  5

Hours of supervisor time              5

Number of purchase orders        3

Refer to the Wake Construction information given above. How much overhead should be applied to the above customer order?

Reference no: EM133422

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