Orange, Inc. has identified the following cost drivers for its expected overhead costs for the year:...
Orange, Inc. has identified the following cost drivers for its expected overhead costs for the year:
| Cost Pools | Budgeted Cost | Cost Driver | Cost Driver Level | |||
| Setup | $ | 220,000 | Number of setups | 1,100 | ||
| Ordering | 110,000 | Number of orders | 5,500 | |||
| Maintenance | 275,000 | Machine hours | 27,500 | |||
| Power | 55,000 | Kilowatt hours | 55,000 | |||
Total direct labor hours budgeted = 11,000 hours.
The following data applies to Product X, one of the products completed during the year.
| Direct materials | $ | 5,500 |
| Direct labor | $ | 6,600 |
| Units completed | 550 | |
| Direct labor hours | 220 | |
| Number of setups | 22 | |
| Number of orders | 44 | |
| Machine hours | 275 | |
| Kilowatt hours | 550 | |
If the activity-based cost drivers are used to allocate overhead cost, the total overhead cost of Product X will be:
Multiple Choice
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$8,520.
-
$8,580.
-
$11,000.
-
$13,200.
-
$9,580.
Homework Answers
Answer
--Correct Answer = Option #2: $ 8580
| Cost pool | Overhead rate | Activity driver for Product X | Overhead cost allocated | ||
| Setup | 200 | per setup | 22 | setup | $4,400 |
| Ordering | 20 | per orders | 44 | orders | $880 |
| Maintenance | 10 | per MHs | 275 | MHs | $2,750 |
| Power | 1 | per KHs | 550 | KHs | $550 |
| $8,580 Answer | |||||
--Calculation
| Cost pool | Overhead rate | Activity driver for Product X | Overhead cost allocated | ||
| Setup | =220000/1100 | per setup | 22 | setup | =200*22 |
| Ordering | =110000/5500 | per orders | 44 | orders | =20*44 |
| Maintenance | =275000/27500 | per MHs | 275 | MHs | =10*275 |
| Power | =55000/55000 | per KHs | 550 | KHs | =1*550 |
Add Answer to:
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