Cocoa Pet Corporation manufactures three models of grooming stations, A standard
ID: 2348697 • Letter: C
Question
Cocoa Pet Corporation manufactures three models of grooming stations, A standard and deluxe model. The following activity and cost information has been compiled:Product #of Setups #of components #of inspections #of direct labor hours
Economy 5 30 5 550
Standard 3 40 6 300
Deluxe 7 50 14 150
Overhead 30,000 60,000 10,000
Assume traditional costing system applies the $100,000 of overhead costs based on direct labor hours
a. What was the total amount of overhead costs assigned to the economy model?
b. What is the total amount of overhead costs assigned to the standard model?
c. What is the total amount of overhead costs for the deluxe model?
Assume an activity-based costing system is used and that the number of setups, the number of components and the number of inspections are identified as the activity based cost for drivers for overhead.
d. What is the total amount of overhead costs assigned to the economy model?
e. What is the total amount of overhead costs assigned to the standard model?
f. What is the total amount of overhead costs assigned to the deluxe model?
Explanation / Answer
(a)
Total direct labour hours = 550 + 300 + 150 = 1000 hours
Total amount of overhead costs assigned to the economy model
= 100000 x 550/1000
= $55000
(b)
Total amount of overhead costs assigned to the standard model
= 100000 x 300/1000
= $30000
(c)
Total amount of overhead costs for the deluxe model
= 100000 x 150/1000
= $15000
Total number of setups = 5 + 3 + 7 = 15
Cost driver rate per setup = 30000/15 = $2000
Total number of componenets = 30 + 40 + 50 = 120
Cost driver rate per component = 60000/120 = $500
Total number of inspections = 5 + 6 + 14 = 25
Cost driver rate per inspection = 10000/25 = $400
d. What is the total amount of overhead costs assigned to the economy model?
5 x 2000 + 30 x 500 + 5 x 400 = $27000
e. What is the total amount of overhead costs assigned to the standard model?
3 x 2000 + 40 x 500 + 6 x 400 = $28400
f. What is the total amount of overhead costs assigned to the deluxe model?
7 x 2000 + 50 x 500 + 14 x 400 = $44600
Hope this helps!