Brief Exercise 17-7 (Part Level Submission) Activity Cost Pools Estimated Overhe

Question

Brief Exercise 17-7 (Part Level Submission)

Activity Cost Pools

Estimated
Overhead

Expected Use of
Cost Drivers per Activity

(a)

Overhead Rates

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(b)

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Brief Exercise 17-7 (Part Level Submission)

Spud, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2017.

Activity Cost Pools

Estimated
Overhead

Expected Use of
Cost Drivers per Activity

Ordering and receiving $94,720 12,800 orders Food processing 492,000 60,000 machine hours Packaging 1,695,450 445,000 labor hours
For 2017, the company had 11,800 orders and used 51,100 machine hours, and labor hours totaled 497,000.

Explanation / Answer

(b) Total Overhead Applied = Activity rates * Activity

= $ 2,399,910

Hence the correct answer is $ 2,399,910

Note:

Activity Cost Pools Estimated Expected Use of Activity rate (Amount / Activity) Actual Activity Overhead Applied ( Activity rate * Actual Activity) Overhead Cost Drivers per Activity Ordering and receiving 94720 12,800 orders 7.40 11,800 orders 87,320 Food processing 4,92,000 60,000 machine hours 8.20 51,100 machine hours 4,19,020 Packaging 16,95,450 4,45,000 labor hours 3.81 4,97,000 labor hours 18,93,570 Overhead Applied 23,99,910

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