Question

Exercise 4-17 a-d (Part Level Submission) Manzeck Company operates a snow-removal service. The company owns five trucks, each of which has a snow plow in the front to plow driveways and a snowthrower in the back to clear sidewalks. Because plowing snow is very tough on trucks, the company incurs significant maintenance costs. Truck depreciation and maintenance represents a significant portion of the company's overhead. The company removes snow at residential locations, in which case the drivers spend the bulk of their time walking behind the snowthrower machine to clear sidewalks. On commercial jobs, the drivers spend most of their time plowing. Manzeck allocates overhead based on labor hours. Total estimated overhead costs for the year are $46,120. Total estimated labor hours are 1,000 hours. The average residential property requires 0.5 hours of labor, while the average commercial property requires 2.5 hours of labor. The following additional information is available. Estimated Overhead Estimated Use of Cost Drivers per Activity Activity Cost Pools Cost Drivers Plowing Square yards of surface plowed Snowthrowing Linear feet of sidewalk cleared $41,000 $5,120 205,000 64,000 (a) Your answer is correct. Determine the predetermined overhead rate under traditional costing. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead rate 46.12

Answer 1

Activity based overhead rate = total overhead cost / cost driver

Plowing = $41,000 / 205,000 = $0.2 per sq. Yard

Snowthrowing = $5,120 / 64,000 = $0.08 per linear foot