Please show work? I would love to understand the thought process. Durban Metal P
ID: 2418309 • Letter: P
Question
Please show work? I would love to understand the thought process.
Durban Metal Products, Ltd., of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers. The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below: The managing director of the company would like information concerning the cost of a recently completed order for heavy-duty trailer axles. The order required 200 direct labor-hours, 20 hours of product testing, and 3 sales calls. Required: Prepare a report summarizing the overhead costs assigned to the order for heavy-duty trailer axles. What is the total overhead cost assigned to the order?Explanation / Answer
Activity Based Costing
Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are actually demanding the activities.
In the mentioned question, cost centers are measured on some acvtivity.
Total overhead Cost for the order is as follows:-
S.No Cost Center Overhead Rate (a) Activity (b) ABC Cost (a*b) 1 Order Size 16.60 200 3320.00 2 Customer Order 356.00 1 356.00 3 Product testing 81.00 20 1620.00 4 Selling 1481.00 3 4443.00 Total Overhead Cost 9739.00