urban Metal Products, Ltd, of the Republic of South Africa makes specialty metal

Question

urban Metal Products, Ltd, of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting dges of bulldozer blades to replacement parts for Land Rovers. The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below Activity Cost Pool Activity Measure Order size Customer orders Number of customer orders Product testingNumber of testing hours Selling Activity Rate Number of direct labor-hours 17.68 per direct labor-hour 352.00 per customer order $ 71.00 per testing hour $1,488.00 per sales call Number of sales calls The managing director of the company would like information concerning the cost of a recently completed order for heavy-duty trailer axles. The order required 150 direct labor-hours, 14 hours of product testing, and 5 sales calls. equired: What is the total overhead cost assigned to the order for heavy-duty trailer axles? Activity Cost Pool ABC Cost Order size Customer orders Product testing Selling Total overhead cost

Explanation / Answer

CALCULATION OF OVERHEAD COST FOR HEAVY DUTY TRAILER Activity Activity Measures Activity Rate No. of Activity Total Cost (Activity Rate X No. of Activity) Order Size No. of Direct labour hours $                            17.60 150 $                                   2,640 Product Testing No. of Testing Hours $                            71.00 14 $                                      994 Selling No. of Selling calls $                      1,488.00 5 $                                   7,440 Customer order No. of Customer Order $                         352.00 1 $                                      352 TOTAL Overhead Cost $                                11,426

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