Sylvan Company uses activity-based costing to determine product costs for extern

Question

  Sylvan Company uses activity-based costing to determine product costs for external financial reports. Some of the entries have been completed to the manufacturing overhead account for the current year, as shown by entry (a) below:

Manufacturing Overhead 2,318,000 At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools Activity Cost Pool Labour related Purchase orders Parts management Board etching General factory Activity Measure Direct labour-hours Number of orders Number of part types Number of boards Machine-hours Estimated Overhead Cost $608,000 37,200 215,020 529,200 525,280 Expected Activity 38,000 DLHs 1,240 orders 260 part types 1,890 boards 78,400 MHs The activities during the year were distributed across the company's four products as follows Product D 9,100 510 85 160 Product A Product B 7,100 310 75 960 Product C Activity Cost Pool Labour related Purchase orders Parts management Board etching General factory Actual Activity 12,700 50 30 410 23.600 10,100 270 90 460 19,600 39,000 DLHs 1.140 orders 280 part types 1,990 boards 80,400 MHs 19,600 17,600 Required Compute the amount of overhead cost applied to each product during the year. (Do not round intermediate calculations.) Applied Overhead Activity Cost Pool Labour related Purchase orders Parts management Board etching General factory Total Product A Product B Product C Product D

Explanation / Answer

Calculation of Overhead applied to Each Product

Step 1- Calculation of Cost Driver Per unit of activity

Step 2 - Amount of Overhead cost applied to each Product

$203200

(12700*$16)

$113600

(7100*$16)

$161600

(10100*$16)

$145600

(9100*$16)

$1500

(50*$30)

$9300

(310*$30)

$8100

(270*$30)

$15300

(510*$30)

$24810

(30*$827)

$62025

(75*$827)

$74430

(90*$827)

$70295

(85*$827)

$114800

(410*$280)

$268800

(960*$280)

$128800

(460*$280)

$44800

(160*$280)

$158120

(23600*$6.7)

$131320

(19600*$6.7)

$131320

(19600*$6.7)

$117920

(17600*$6.7)

Particulars Overhead cost Expected Activity Cost Per unit of cost Driver Labour Related $608000 38000 Hours $16 Per Hour Purchase orders $37200 1240 Orders $30 Orders Parts Management $215020 260 Part Types $827 Part Types Board Etching $529200 1890 Boars $280 Boards General Factory $525280 78400 Mhs $6.7 Mhs

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