Newcomb manufacturing company has identified these overhead cost pools and cost
ID: 2541516 • Letter: N
Question
Newcomb manufacturing company has identified these overhead cost pools and cost drivers: Overhead cost pool Budgeted overhead cost cost driver Machine setups 240,000 number of setups Material handling 90,000 units of raw material Quality control inspection 48,000 number of inspections Other overhead costs 160,000 machine hours Total 538,000 Overhead cost pool budgeted level for cost driver pool rate Machine setups 200 setups 1,200 per setup Material handling 60,000 units 1.50 per unit Quality control 1,200 inspections 40 per inspection Other overhead costs 20,000 machine hours 8 per machine hour Job 1040 has the following production requirements: Machine setups 14 Raw material 22,400 units Inspections 32 Machine hours 1700 Using a single plant wide overhead allocation method based on machine hours, what is the dollar amount of overhead to be allocated to job 1040? 160,000, 45,730, 538,000, or 65,280
Explanation / Answer
Overhead rate for each activity Activity Cost $ Driver Volume Overhead Rate Machine Setups 2,40,000 200 setups 1200 per setup Material handling 90,000 60000 units 1.5 per uint Quality control inspection 48,000 1200 inspections 40 per inspection Other overhead costs 1,60,000 20,000 Machine hours 8 per machine hour Total 5,38,000 Computation of dollar amount of overhead allocated to job 1040 Activity Driver Volume Overhead Rate Overhead cost Machine Setups 14 setups 1200 per setup 16,800 Material handling 22,400 units 1.5 per uint 33,600 Quality control inspection 32 inspections 40 per inspection 1,280 Other overhead costs 1,700 Machine hrs 8 per machine hour 13,600 Total Overhead cost 65,280