ABC Overhead Calculation Tip Top Company sells umbrellas suited for small and la
ID: 2423007 • Letter: A
Question
ABC Overhead Calculation
Tip Top Company sells umbrellas suited for small and large picnic tables. In accordance with the advice of its accountant, Tip Top is considering whether to adopt an activity-based costing system. To evaluate the possible impact on cost, the company has accumulated the following data from last year:
Required:
A. Calculate the overhead rates for the following activities: purchasing, receiving, and sales. If required, round your answers to the nearest cent.
B. Calculate the dollar amount of overhead that should be assigned to small and large umbrellas for each of the three activities.
Overhead Rate Purchasing $ per purchase order Receiving $ per shipment received Sales $ per sales orderExplanation / Answer
Statement showing computations Activity Allocation Base O/H Cost = a No ofActivities = Large + Small = b Activity rate c= a/b No of actvty of small = d Total cost of small = c*d No of actvty of large = e Total cost of large = c*e Purchasing No of purchase orders 300,000.00 15,000.00 20.00 10,000.00 200,000.00 5,000.00 100,000.00 Receivng No of shi[ment recd 150,000.00 20,000.00 7.50 12,500.00 93,750.00 7,500.00 56,250.00 Sales No of sales orders 150,000.00 15,000.00 10.00 8,500.00 85,000.00 6,500.00 65,000.00 378,750.00 221,250.00