Exercise 4-5 (30 minutes)
1. The activity rates are computed as follows:
Activity Cost Pool
(a)
Estimated
Overhead
Cost
(b)
Expected
Activity
(a) ÷ (b)
Activity
Rate
Labor related …………………
$ 156,000
26,000
DLHs
$6.00
per DLH
Purchase orders ……………..
11,000
220
orders
$50.00
per order
Parts management ………….
80,000
100
part types
$800.00
per setup
Board etching ………………..
90,000
2,000
boards
45.00
per board
General factory ………………
180,000
20,000
MHs
9.00
per MH
Total …………………………...
$517,000
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Solutions Manual, Chapter 4 2
Exercise 4-5 (continued)
2. The overhead assigned to each product can be computed as follows:
Product A
Activity Cost Pool
(a)
Activity Rate
(b)
Actual Activity
(a) × (b)
ABC Cost
Labor related ………
$6
per DLH
6,000
DLHs
$ 36,000
Purchase orders …..
$50
per order
60
orders
3,000
Parts management .
$800
per part type
30
part types
24,000
Board etching ………
$45
per board
500
boards
22,500
General factory ……
$9
per MH
3,000
MHs
27,000
Total ………………….
$112,500
Product B
Activity Cost Pool
(a)
Activity Rate
(b)
Actual Activity
(a) × (b)
ABC Cost
Labor related ………
$6
per DLH
11,000
DLHs
$ 66,000
Purchase orders …..
$50
per order
30
orders
1,500
Parts management .
$800
per part type
15
part types
12,000
Board etching ………
$45
per board
900
boards
40,500
General factory ……
$9
per MH
8,000
MHs
72,000
Total ………………….
$192,000
Product C
Activity Cost Pool
(a)
Activity Rate
(b)
Actual Activity
(a) × (b)
ABC Cost
Labor related ………
$6
per DLH
4,000
DLHs
$ 24,000
Purchase orders …..
$50
per order
40
orders
2,000
Parts management .
$800
per part type
40
part types
32,000
Board etching ………
$45
per board
600
boards
27,000
General factory ……
$9
per MH
3,000
MHs
27,000
Total ………………….
$112,000
Exercise 4-5 (continued)
Product D
Activity Cost Pool
(a)
Activity Rate
(b)
Actual Activity
(a) × (b)
ABC Cost
Labor related ……….
$6
per DLH
5,000
DLHs
$ 30,000
Purchase orders ……
$50
per order
90
orders
4,500
