Question

Diamond Cleats Co. manufactures cleats for baseball shoes. It has outlined the following overhead cost drivers: Overhead Costs Pool Cost Driver Overhead Cost Budgeted Level for Cost Driver Budgeted Quality control # of inspections $ 79,200 800 Machine time Machine hours 264,320 826 Materials handling # of Batches 14,850 135 Miscellaneous overhead cost Direct labor hours 67,000 7,300 Diamond Cleats Co. has an order for cleats that has the following production requirements: Number of inspections 630 Number of machine hours 390 Number of batches 6 Direct labor hours 1,560 Using activity-based costing, applied machine overhead for the baseball cleat order is: Multiple Choice

$47,200.

$54,700.

$39,900.

$58,550.

$124,800.

Answer 1

Correct answer-----------$124,800

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Machine time	Number of machine hour	$ 264,320	826	$          320.00	Per machine hour

.

Cost assigned to Baseball
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Machine time	$        320.00	390.00	$ 124800.00