a) Smith Industries uses activity-based costing to determine the costs of its tw
ID: 2508791 • Letter: A
Question
a) Smith Industries uses activity-based costing to determine the costs of its two products: A and B. The estimated total cost and expected number of activities for one of the company's activity cost pools are:
Cost
Product A
Product B
$14,000
400
300
Using activity-based costing, what is the activity rate for this activity?
b) Jones and Sons, Inc. uses activity-based costing to compute product costs. Estimated costs totaled $40,000 and expected number of activities equals 2,500 for a particular activity cost pool. The actual activity count for one of the products that Jones and Sons manufactures was 2,490. What is the amount of overhead applied for this product for this activity?
c) Bar-BQs-Are-Us has two products: A and B. The annual production level of Product A is 9,094 units. The annual production level of Product B is 15,826. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected number of activities for each of its three activity cost pools.
Overhead cost
Expected number of activities
Product A
Product B
Activity #1
$29,200
1000
500
Activity #2
$40,000
200
800
Activity #3
$180,000
600
5400
What is the activity rate for Activity #3?
d) For the products described in part c) find the overhead cost per unit for Product A.
Cost
Product A
Product B
$14,000
400
300
Explanation / Answer
A
total overhead cost
14000
total of expected number of activity
(400+300)
700
Activity rate per activity
total overhead cost/total of expected activity =14000/20
20
B-
expected activity rate
40000/2500
16
overhead applied to product
16*2490
39840
c-
activity rate for C
180000/(5400+6000)
30
D
Activity rate 1
(29200/1500)*1000
19466.67
Activity rate 2
(40000/1000)*200
8000
Activity rate -3
(180000/6000)*600
18000
total overhead allocated to A
45467
no of units of Product A produced
9094
Overhead rate per unit
45466.67/9094
5.000
A
total overhead cost
14000
total of expected number of activity
(400+300)
700
Activity rate per activity
total overhead cost/total of expected activity =14000/20
20
B-
expected activity rate
40000/2500
16
overhead applied to product
16*2490
39840
c-
activity rate for C
180000/(5400+6000)
30
D
Activity rate 1
(29200/1500)*1000
19466.67
Activity rate 2
(40000/1000)*200
8000
Activity rate -3
(180000/6000)*600
18000
total overhead allocated to A
45467
no of units of Product A produced
9094
Overhead rate per unit
45466.67/9094
5.000
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