Xie Company identified the following activities, costs, and activity drivers for
ID: 2557866 • Letter: X
Question
Xie Company identified the following activities, costs, and activity drivers for 2017. The company manufactures two types of go-karts Deluxe and Basic. Activity Handling materials Inspecting product Processing purchase orders Paying suppliers Insuring the factory Designing packaging Expected Costs 625,000 900,000 105,000 175,000 300,000 75,000 Expected Activity 100,000 parts 1,500 batches 700 orders 500 invoices 40,000 square feet 2 models Assume that the following information is available for the company's two products for the first quarter of 2017 Deluxe Model 10,000 units 20,000 parts Basic Model 30,000 units 30,000 parts Production volume Parts required Batches made Purchase orders Invoice:s Space occupied Models 250 batches 100 batches 50 orders 50 invoices 20 orders 10 invoices 10,000 sq. ft. 7,000 sq. ft 1 model 1 model Required Compute activity rates for each activity and assign overhead costs to each product model using activity-based costing (ABC). What is the overhead cost per unit of each model? (Round activity rate answers to 2 decimal places.) uxe Activity Handling materials Inspecting product Processing orders Paying suppliers Insuring factory Designing packaging Activity Rate Cost driver quantity incurred OH Allocated SIC Activity Handling materials Inspecting product Processing orders Paying suppliers Insuring factory Activity Rate Cost driver quantity incurred OH AllocatedExplanation / Answer
Calculation of Activity Rate
activity
Estimated costs
Expected Activity
Activity Rate
A
B
C = A/B
Handling Material
$ 625,000
100000
$ 6
per part
Inspecting Product
$ 900,000
1500
$ 600
per batch
Processing purchase orders
$ 105,000
700
$ 150
per order
paying suppliers
$ 175,000
500
$ 350
per invoice
Insuring the factory
$ 300,000
40000
$ 8
per sq feet
Designing packaging
$ 75,000
2
$ 37,500
per model
DeluX
Activity
Activity Rate
Cost Driver quantity incurred
OH Allocated
A
B
C = A*B
Handling Material
$ 6
per part
20000
parts
$ 125,000
Inspecting Product
$ 600
per batch
250
batch
$ 150,000
Processing purchase orders
$ 150
per order
50
order
$ 7,500
paying suppliers
$ 350
per invoice
50
invoice
$ 17,500
Insuring the factory
$ 8
per sq feet
10000
sq feet
$ 75,000
Designing packaging
$ 37,500
per model
1
model
$ 37,500
$ 412,500
Basic
Activity
Activity Rate
Cost Driver quantity incurred
OH Allocated
A
B
C = A*B
Handling Material
$ 6
per part
30000
parts
$ 187,500
Inspecting Product
$ 600
per batch
100
batch
$ 60,000
Processing purchase orders
$ 150
per order
20
order
$ 3,000
paying suppliers
$ 350
per invoice
10
invoice
$ 3,500
Insuring the factory
$ 8
per sq feet
7000
sq feet
$ 52,500
Designing packaging
$ 37,500
per model
1
model
$ 37,500
$ 344,000
Calculation of Activity Rate
activity
Estimated costs
Expected Activity
Activity Rate
A
B
C = A/B
Handling Material
$ 625,000
100000
$ 6
per part
Inspecting Product
$ 900,000
1500
$ 600
per batch
Processing purchase orders
$ 105,000
700
$ 150
per order
paying suppliers
$ 175,000
500
$ 350
per invoice
Insuring the factory
$ 300,000
40000
$ 8
per sq feet
Designing packaging
$ 75,000
2
$ 37,500
per model
DeluX
Activity
Activity Rate
Cost Driver quantity incurred
OH Allocated
A
B
C = A*B
Handling Material
$ 6
per part
20000
parts
$ 125,000
Inspecting Product
$ 600
per batch
250
batch
$ 150,000
Processing purchase orders
$ 150
per order
50
order
$ 7,500
paying suppliers
$ 350
per invoice
50
invoice
$ 17,500
Insuring the factory
$ 8
per sq feet
10000
sq feet
$ 75,000
Designing packaging
$ 37,500
per model
1
model
$ 37,500
$ 412,500
Basic
Activity
Activity Rate
Cost Driver quantity incurred
OH Allocated
A
B
C = A*B
Handling Material
$ 6
per part
30000
parts
$ 187,500
Inspecting Product
$ 600
per batch
100
batch
$ 60,000
Processing purchase orders
$ 150
per order
20
order
$ 3,000
paying suppliers
$ 350
per invoice
10
invoice
$ 3,500
Insuring the factory
$ 8
per sq feet
7000
sq feet
$ 52,500
Designing packaging
$ 37,500
per model
1
model
$ 37,500
$ 344,000
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