Question

Do It! Review 4-2 a-c Flynn Industries has three activity cost pools and two products. It estimates production 2,000 units of Product BC113 and 1,000 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following data relative to those activity cost pools and cost drivers. Estimated Use of Cost Drivers per Product Annual Overhead Data Estimated t Estimated Use of Cost Product Product Activity BC113 AD908 12 4,840 1,050 3,790 180 320 Activity Cost Pools Cost Drivers Setups Overhead $23,400 Drivers per Machine setup Machining Packing Using the above data, do the following: 39 27 Machine hours Orders 87,120 26,500 500 Prepare a schedule showing the computations of the activity-based overhead rates per cost driver. Activity Cost Estimated Estimated Use of Cost Activity-Based Overhead Rates Pools Overhead Drivers per Activity Machine setup setups machine hours orders per setup per machine hr. per order Packing

Answer 1

Schedule showing the computation of the activity- based overhead rates per cost drivers:

Activity Cost Pool	Estimated Overheads(A)	Estimated use of cost driver per activity(B)	Activity Based overhead rates (A) / (B)
Machine Setup	$ 23400	39 Setups	600
Machining	$ 87120	4840 Machine hours	18
Packing	$ 26500	500 Orders	53
	$ 137020

Schedule assigning each activity’s overhead cost to the two Products:

BC113
Activity Cost Pool	Estimated use of cost driver per activity (A)	Activity Based overhead rates (B)	Cost Assigned (A) * (B)
Machine Setup	27 Setups	600	$16200
Machining	1050 Machine hours	18	$18900
Packing	180 Orders	53	$9540
Total Assigned cost			$44640

AD908
Activity Cost Pool	Estimated use of cost driver per activity (A)	Activity Based overhead rates (B)	Cost Assigned (A) * (B)
Machine Setup	12 Setups	600	$7200
Machining	3790 Machine hours	18	$68220
Packing	320 Orders	53	$16960
Total Assigned cost			$92380

Computation of Overhead cost per unit of each product:

	BC113	AD908
Overhead cost per unit	$44640/2000 units = $22.32	$92380 / 1000 units = $92.38