E4-10 Assigning Costs Using Activity Rates [LO 4-4] Schell Company manufactures
ID: 2421725 • Letter: E
Question
E4-10 Assigning Costs Using Activity Rates [LO 4-4]
Schell Company manufactures automobile floor mats. It currently has two product lines, the Standard and the Deluxe. Suppose that Schell has conducted further research into its overhead and potential cost drivers. As a result, the company has compiled the following detailed information, breaking total overhead into three cost pools:
Calculate the amount of overhead that Schell will assign to the Standard floor mat line. (Round your intermediate calculations to 2 decimal places.)
Determine the amount of overhead Schell will assign to the Deluxe product line. (Round your intermediate calculations to 2 decimal places.)
Schell Company manufactures automobile floor mats. It currently has two product lines, the Standard and the Deluxe. Suppose that Schell has conducted further research into its overhead and potential cost drivers. As a result, the company has compiled the following detailed information, breaking total overhead into three cost pools:
Explanation / Answer
1). Activity rates for each cost pool assuming Schell uses an ABC system
Activity Rate
Material Handling
= 3750/ 100
= 37.50
per Material Move
Quality Control
= 13,860/1000
= 13.86
per Inspection
Maintenance
=21,450/ 7150
=3
per Machine Hour
2). Amount of overhead that Schell will assign to the Standard floor mat line
Total Overhead Assigned = Material Handling + Quality Control + Maintenance
= (37.50 *30 ) + ( 13.86 * 400 ) + (3 * 4150)
= 19119
3. amount of overhead Schell will assign to the Deluxe product line.
Total Overhead Assigned = Material Handling + Quality Control + Maintenance
= (37.50 *70 ) + ( 13.86 * 600 ) + (3 * 3000)
= 19941
Activity Rate
Material Handling
= 3750/ 100
= 37.50
per Material Move
Quality Control
= 13,860/1000
= 13.86
per Inspection
Maintenance
=21,450/ 7150
=3
per Machine Hour
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