After reading an article about activity-based costing in a trade journal for the

Question

After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Rey found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.

Overhead has been applied to output at a rate of 45% of direct labor costs. The following data pertain to Job 6.15.

What is the total cost of Job 6.15 if Business Solutions applies overhead at 45% of direct labor cost? (Omit the "$" sign in your response.)

What is the total cost of Job 6.15 if Business Solutions uses activity-based costing? (Do not round your intermediate calculations. Omit the "$" sign in your response.)

  Activity Cost Driver   Setting up machines $ 18,060   21 batches   Inspecting components $ 4,100   4,100 parts   Providing utilities $ 11,000   5,500 machine hours

Explanation / Answer

1. Total Cost = 5,960

Note:

2. Total Cost = 8,910

Note :

a. Activity rates and Allocation:

Total Cost =

Direct materials $ 1,900   Direct labor $ 2,800 Overhead ( 45% * $ 2,800) $ 1260 5,960

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