Hansen Company uses activity-based costing. The factory overhead budget for the
ID: 341817 • 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. Determine the overhead rate for each cost pool, using the most appropriate allocation base for each pool.
Cost Pool
Budgeted Amount
Divided by
Overhead Rate
A
B
A/B
Supervision
320,000
10,000
Direct labor hours
32
Machine usage
420,000
6,000
Machine hours
70
Machine setups
187,000
110
Number of setups
1,700
Design changes
126,000
35
Number of design changes
3,600
Totals
1,053,000
b. 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.
c. Determine the cost of Job 80130 if Hansen used the direct labor hour method of applying overhead.
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
a) The overhead rates are proper according to the cost pool.
b)
14400 142900
Cost of Job 80130 using Activity based cost Particulars Amt Direct Material 45000 Direct Labour 20000 Overheads 142900 Total Cost under activity based costing 207900 Working: Calculation of Overhead Cost Pool Overhead rate Total 2000 Direct labour Hours 32 64000 800 Machine hour 70 56000 5Setup 1700 8500 4 design changes 360014400 142900
C Cost of Job 80130 using Labour Hour method Particulars Amt Direct Material 45000 Direct Labour 20000 Overheads (2000*105.3) 210600 Total Cost under activity based costing 275600 Overead rate per labour Hour Amt Total Factory Overhead 1053000 Total Labour Hours 10000 Overhead rate per Labour Hour 105.3Related Questions
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