Hansen Company uses activity-based costing. The factory overhead budget for the
ID: 341780 • Letter: H
Question
Hansen Company uses activity-based costing. The factory overhead budget for the coming period is $1,053,000, consisting of the following:
Cost Pool
Budgeted Amount
Supervision
$320,000
Machine usage
420,000
Machine setups
187,000
Design changes
126,000
Totals
$1,053,000
The potential allocation bases and their estimated amounts were as follows:
Allocation Base
Budgeted Amount
Number of design changes
35
Number of setups
110
Machine hours
6,000
Direct labor hours
10,000
a. Job 80130 required $45,000 for direct materials, $20,000 for direct labor, 2,000 direct labor hours, 800 machine hours, five setups and four design changes. Determine the cost of Job 80130.
Cost Pool
Budgeted Amount
Supervision
$320,000
Machine usage
420,000
Machine setups
187,000
Design changes
126,000
Totals
$1,053,000
Explanation / Answer
Answer: Calculation of cost driver perunit(cost pool)
1)Supervision =$320000
per unit = supervision/direct labour hours
=$320000/10000 =32
2)Machine usage=420000
per unit = Machine usage/machine hours
= 420000/6000=70
3)Machine setups =187000
per unit =Machine setups/number of setups
= 187000/110=1700
4)Number of design=126000
per unit =Design charges/Number of designs
= 126000/35=3600
Calculation of total cost of Job 80130 is as follows
Direct Materials =$45000
Direct Labour =$20000
Prime cost =$65000
ADD: Over heads
1)Direct labour hours-2000*32=$64000
2)Machine Hours 800*70 =$56000
3)Setups 5*1700 =$ 8500
4)Designs 4*3600 =$14400
Total cost of job =$207900
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