E4-10 Assigning Costs Using Activity Rates [LO 4-4] Schell Company manufactures

Question

E4-10 Assigning Costs Using Activity Rates [LO 4-4] Schell Company manufactures automobile floor mats. It curently 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: QuantitylAmount Activity Cost Pools Material handling Quality control Cost Driver Number of moves Number of inspections Number of machine hours Cost Assigned to Pool S 2,024.00 S8,250.00 $14,360.00 Quantity/Amount Consumed by Standard Floor Mat Line 47 moves 650 inspections 2,910 machine hours Deluxe Floor Mat Line 45 moves 600 inspections 4,270 machine hors Machine maintenance Required: 1. Calculate the activity rates for each cost pool assuming Schell uses an ABC system. (Round your answers to 2 decimal places.) Activity Rate Material Handling Quality Control Machine maintenance per Material Move per Inspection per Machine Hour 2. Calculate the amount of overhead that Schell will assign to the Standard floor mat line. (Round your intermediate calculations to 2 decimal place.) 3. Determine the amount of overhead Schell will assign to the Deluxe product line. (Round your intermediate calculations to 2 decimal places.)

Explanation / Answer

Calculate activity rate :

2) Overhead assigned to standard floor mat = (22*47+6.6*650*2910*2) = 11144

2) Overhead assigned to deluxe floor mat = (22*45+6.6*600*4270*2) = 13490

Activity rate Material handling 22 Per material move Quality control 6.6 Per inspection Machine maintenance 2 per machine hour

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