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Fle Edt View History Bookmarks People Window Help 71%.) Sat 4:40 PM O ezto.mheducation.comhm.p Schell Company manufactures automobile floor mats. It cumently has two product lines, the Standard and the Del Schell has a total of $25,440 in overhead. It cumenty uses a traditional oost systom with overhead applied to the product on the basis of ether labor hours or machine hours. Schell has compililed the following information about possible cost drivers and its two product lines Consumed by machine hours 3080 machine hous machina houns Required 1. Suppose Schell unes a traditional costing system wlith diredt labor hours as the oost driver. Determine the amount of overhead assigned to each product line (Round activity rates to 4 decimal places and final answers to 2 decimal places Determine the arourt of ove tead assigned to each product Ire (Roundacti ity rates to 2. S poose Schea uses a traditional co sing system,?machine hours as the oost atver 4 decimal places and final answers to 2 decimal places 0. command opion option commanExplanation / Answer
In the Books of Schell Company
1.Traditional costing systemwith direct labour hours as cost driver(as per working note)
Overheads assigned
Standard floor mat
$ 14676.9
Deluxe floor mat
$ 10763.06
Working Note:
Total Overheads=$ 25,440, Total labour hours=1040 hours
Therefore Overheads/labour hour=$ 25,440/1040 hours= $ 24.4615/hour
Products
Standard Floor Mat
Deluxe Floor Mat
Labour
Hours used
600 hours
440 hours
Overheads
Assigned
600 hours* $24.4615
=$ 14676.9
440 hours*$ 24.4615
$ 10763.06
2. Traditional costing system with machine hours as cost driver(as per working note)
Overheads assigned
Standard floor mat
$10933.38
Deluxe floor mat
$ 14506.38
Working note:
Total Overheads= $ 25,440 , Total Machine hours=7120 machine hours
Therefore overheads /machine hour= $ 3.5730/machine hour
Products
Standard floor mat
Deluxe floor mat
Machine Hours used
3060 hours
4060 hours
Overheads Assigned
$ 10933.38
$14506.38
Solution 1.
Calculation of Activity Rate for each cost pool using ABC costing
Cost pool
Cost
Cost driver
Cost driver rate
Material handling
$ 2325
93 moves(43+50)
$ 25/move
Quality control
$5860
1240 inspections(570+670)
$ 4.73/inspection
Machine maintenance
$17255
7200 machine hours(2960+4240)
$ 2.40/machine hour
Solution2:
Amount of overheads assigned to standard floor mat=$ 10875.10(working note below)
Solution 3:
Amount of overheads assigned to Deluxe product line=$ 14595.10(working note below)
Working Note: Statement showing overhead allocation
Particulars of cost
Cost driver
Standard floor mat
Deluxe product line
Total
Machine handling
No of machine hours
$ 7104
(2960* 2.40/hour)
$ 10176
(4240* 2.40/hour)
$ 17280
Quality control
No of inspections
$ 2696.10
(570*4.73/inspection)
$ 3169.10
(670*4.73/inspection)
$ 5865.2
Machine maintenance
No of moves
$ 1075
(43* 25/move)
$ 1250
(50*25/move)
$ 2325
$ 10875.10
$ 14595.10
$25470.2
Overheads assigned
Standard floor mat
$ 14676.9
Deluxe floor mat
$ 10763.06
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