Craftmore Machining produces machine tools for the construction Industry. The fo
ID: 2492268 • Letter: C
Question
Craftmore Machining produces machine tools for the construction Industry. The following detalls about overhead costs were taken from its company records. Production Activity Grinding Polishing Product modification Providing power System calibration Indirect LaborIndirect Materlals Other Overhead $380,000 600,000 440,000 $180,000 $200,000 Additional Information on the drivers for its production activities follows. Grinding Polishing Product modification Providing power System calibration 2,000 machine hours 12,000 machine hours 1,600 englneering hours 17,000 direct labor hours 700 batches value Required information 5.00 points Required 1. Compute the activity overhead rates using ABC. Form cost pools as appropriate Overhead Cost Activity Drivers Activity Rate VI Grinding and Polishing Product modification Providing power System calibration Machine hours Engineering hrs Direct labor hrs batches 0 per machine hour 0 per engineering hour 0 per direct labor hour 0 per batchExplanation / Answer
ANS :- 1. Activity overhead rate using ABC :-
ANS :- 2. Overhead cost plant wise :-
Job 4286
ANS - 3. Overhead cost per unit
ANS 4. Plantwide overhead rate based on direct labor hours. :-
plantwide overhead rate = total overhead /total labor hrs
1800000/17000 = 105.88
Ans 5. overhead cost per unit
as here is more than one plant and we know that ABC costing is best to use in this type of case. and as in this case plant wise cost higher than ABC costing which shows company having higher profit in case of ABC costing . therefor here is ABC COSTING is suitable .
Activity overhead cost activity drivers activity rate grinding $380,000 machin hours 31.67 per machine hour polishing $180,000 machin hours 15.00 per machine hour product modification $600,000 engineering hrs 375.00 per engineering hour providing power $200,000 direct labor hrs 11.76 per direct labor hrs system calibration $440,000 batches 628.57 per batch