Problem 1 Part A: One overhead activity is identified as Purchasing. The cost dr
ID: 2556347 • Letter: P
Question
Problem 1 Part A: One overhead activity is identified as Purchasing. The cost driver is pounds of material.E over activity rate (or POHR) for Purchasing. Part B: fo r this activity is $120,0Che estimated pounds of material is 10,000. One overhead activity is identified as Quality Control. The cost driver is number of inspections. Estimated overhead for this activity is $60,000 and the estimated number of inspections is 300. Calculate the activity rate (or POHR) for Quality Control. Part C: One overhead activity is identified as Machinery. The cost driver is number of machine hours used. Estimated overhead for this activity is $200,000 and the estimated number of machine hours is 20,000. Calculate the activity rate (or POHR) for Machinery. Part D: Using the rates calculated in the questions above for Purchasing, Quality Control, and Machinery, assign overhead to Product J which used 500 lbs of material, 1 inspection, and 750 machine hours (SHOW YOUR WORK).Explanation / Answer
Part A
Overhead Activity - Purchasing
Cost Driver - Pounds of Material
Purchasing Amount
$ 120,000
Material
10000
pounds
Activity Rate
= Estimated Cost of Purchasing / Pounds of Material purchased
= 120000 / 10000
$ 12
per pound
Part B
Overhead Activity - Quality Control
Cost Driver - Number of Inspections
Quality Control Overhead cost
$ 60,000
Total number of Inspections
300
Activity Rate
= Estimated Cost of Quality Control / No. of inspections
= 60000 / 300
$ 200
per inspection
Part C
Overhead Activity - Machinery
Cost Driver - Number of Machine hours
Estimated Machinery Cost
$ 200,000
Total Machine hours used
20000
hours
Activity Rate
= Estimated cost of Machinery / Total no. of Machine Hours Used
= 200000 / 20000
$ 10
per Machine hour
Cost Sheet of Product J
Material
$ 6,000
= 500 * 12
Quality Control Cost
$ 200
= 1 * 200
Machinery Cost
$ 7,500
= 750 * 10
Total Cost
$ 13,700
Part A
Overhead Activity - Purchasing
Cost Driver - Pounds of Material
Purchasing Amount
$ 120,000
Material
10000
pounds
Activity Rate
= Estimated Cost of Purchasing / Pounds of Material purchased
= 120000 / 10000
$ 12
per pound
Part B
Overhead Activity - Quality Control
Cost Driver - Number of Inspections
Quality Control Overhead cost
$ 60,000
Total number of Inspections
300
Activity Rate
= Estimated Cost of Quality Control / No. of inspections
= 60000 / 300
$ 200
per inspection
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