Question

Schell Company manufactures automobile floor mats. It currently has two product lines, the Standard and the Deluxe. Suppose that Schell has conducted further research into its overhead and potential cost drivers. As a result, the company has compiled the following detailed information, breaking total overhead into three cost pools:

Activity Cost Pools		Cost Driver	Cost Assigned to Pool				Quantity/Amount Consumed by Standard Floor Mat Line		Quantity/Amount Consumed by Deluxe Floor Mat Line
Material handling		Number of moves		$	1,564.00		33 moves		59 moves
Quality control		Number of inspections		$	8,250.00		520 inspections		730 inspections
Machine maintenance		Number of machine hours		$	14,160.00		2,910 machine hours		4,170 machine hours

Required:

1. Calculate the activity rates for each cost pool assuming Schell uses an ABC system.

2. Calculate the amount of overhead that Schell will assign to the Standard floor mat line.

3. Determine the amount of overhead Schell will assign to the Deluxe product line.

The University of Dental Health (UDH) is a state-run university focusing on the education and training of dentists, dental assistants, dental hygienists, and other dental professionals. The university provides both traditional undergraduate courses to 11,050 students and continuing professional education (CPE) courses to 5,950 practicing professionals. UDH has just hired a new controller who wants to utilize ABC. The controller has identified three key activities performed by the university and the cost of each of these activities:

• UDH has 3 buildings with a total of 170,000 square feet of classroom and facility space. Due to the large space requirements for labs and other training facilities, the undergraduate program utilizes 153,000 square feet. Total cost, $1,904,000.
• UDH offers career placement services for undergraduate students, career counseling for active professionals taking CPE courses, and other student services to both groups. Total cost, $510,000.
• UDH offers 1,400 different instructional courses each year, 980 of which are undergraduate courses. Total cost, $3,500,000.

Required:
1. Compute an activity rate for each of the three activities identified by the controller.
2. Compute cost driver values and activity proportions for each group of students for each activity.
3. Determine the amount of costs assigned to each group of students and the cost per student to UDH to provide these three key activities.

Schell Company manufactures automobile floor mats. It currently has two product lines, the Standard and the Deluxe. Suppose that Schell has conducted further research into its overhead and potential cost drivers. As a result, the company has compiled the following detailed information, breaking total overhead into three cost pools:

Activity Cost Pools		Cost Driver	Cost Assigned to Pool				Quantity/Amount Consumed by Standard Floor Mat Line		Quantity/Amount Consumed by Deluxe Floor Mat Line
Material handling		Number of moves		$	3,094.00		44 moves		47 moves
Quality control		Number of inspections		$	7,688.00		560 inspections		680 inspections
Machine maintenance		Number of machine hours		$	13,718.00		3,040 machine hours		4,180 machine hours

Required:

1. Calculate the activity rates for each cost pool assuming Schell uses an ABC system.

2. Calculate the amount of overhead that Schell will assign to the Standard floor mat line.

3. Determine the amount of overhead Schell will assign to the Deluxe product line.

Answer 1

1) Activity rate

	Activity rate
Material handling	1564/92 = 17 per move
Quality control	8250/1250 = 6.60 per inspection
machine maintenance	14160/7080 = 2 per machine hour

2) Overhead assigned to Standard floor mat line

	Overhead assigned
Material handling	561
Quality control	3432
Machine maintenance	5820
Total	9813

3) Overhead assigned to Deluxe floor mat line

	Overhead assigned
Material handling	1003
Quality control	4818
Machine maintenance	8340
Total	14161

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