Prepare a schedule ss gning esch activity\'s overhead cost pool to each product,
ID: 2545013 • Letter: P
Question
Prepare a schedule ss gning esch activity's overhead cost pool to each product, based on the use of cost dnvers. Include a computation of overhead cost per ter Round overhead rate, cost per liter to 3 decimal places, e.q. 12.250 and cost assigned to 0 decimal places, e.a 12,250.) CoolDay vCast Asigned Fxpected Use Activity-Based Expected Use Activity-Based Activity Cast Pool Cost Drivers Grepe processing Bottling and corking Labeling snd bexing Maintain and inspect equipment Total costs assigned Liters preduced Overhead cost per liter Compute the total manufacturing cost per liter for both products under ABC. (Round overhead cost per iter to 3 decimal places, e.g. 1.225.) CoolDay Manufacturing cost per literExplanation / Answer
Solution:
a.
CoolDay
LiteMist
Activity Cost Pools
Expected
Use of
Cost
Drivers
X
Activity-
Based
Overhead
Rates
=
Cost
Assigned
Expected
Use of
Cost
Drivers
X
Activity-
Based
Overhead
Rates
=
Cost
Assigned
Grape processing
Aging
Bottling and corking
Labeling and boxing
Maintain and inspect
equipment
Total costs assigned (a)
Liters produced (b)
Overhead cost per
liter [(a) ÷ (b)]
6,000
3,000,000
600,000
600,000
350
$22.24
$0.102
$0.319
$0.221
$302.5
$133,440
306,000
191,400
132,600
238,475
$1,001,875
3,000,000
$0.334
600 3,600,000
300,000
300,000
450
$22.24
$0.102
$0.319
$0.221
$302.5
$13,344
367,200
95,700
66,300
136,125
$678,669
300,000
$2.262
Products
Manufacturing Costs
CoolDay
LiteMist
Direct materials
Direct labor
Overhead
$0.400
0.250
0.241
$0.984
$1.200
0.500
2.262
$3.962
Activity Cost Pools
Estimated
Overhead
÷
Expected Use
of Cost Drivers
=
Activity-Based
Overhead Rate
Grape processing
Aging
Bottling and corking
Labeling and boxing
Maintain and inspect
equipment
$ 146,804
673,200
287,100
198,900
242,400
$1,2548,404
6,600
6,600,000
900,000
900,000
800
$22.24 per cart
$0.102 per month
$0.319 per bottle
$0.221 per bottle
$302.5 per inspection
b.
Solution:
Computation costs – Traditional costing
Overhead cost per direct labor hour is $1,548,404/(150,000 + 21,000) = $9.055
Manufacturing costs
CoolDay
LiteMist
Direct materials
$0.40
$1.20
Direct labor
$0.50
$0.90
Overhead
$0.453
$0.634
$1.353
$2.734
*$9.055 x 0.05, **$9.055 x 0.07
Activity Cost Pools
Estimated
Overhead
÷
Expected Use
of Cost Drivers
=
Activity-Based
Overhead Rate
Grape processing
Aging
Bottling and corking
Labeling and boxing
Maintain and inspect
equipment
$ 146,804
673,200
287,100
198,900
242,400
$1,2548,404
6,600
6,600,000
900,000
900,000
800
$22.24 per cart
$0.102 per month
$0.319 per bottle
$0.221 per bottle
$302.5 per inspection
CoolDay
LiteMist
Activity Cost Pools
Expected
Use of
Cost
Drivers
X
Activity-
Based
Overhead
Rates
=
Cost
Assigned
Expected
Use of
Cost
Drivers
X
Activity-
Based
Overhead
Rates
=
Cost
Assigned
Grape processing
Aging
Bottling and corking
Labeling and boxing
Maintain and inspect
equipment
Total costs assigned (a)
Liters produced (b)
Overhead cost per
liter [(a) ÷ (b)]
6,000
3,000,000
600,000
600,000
350
$22.24
$0.102
$0.319
$0.221
$302.5
$133,440
306,000
191,400
132,600
238,475
$1,001,875
3,000,000
$0.334
600 3,600,000
300,000
300,000
450
$22.24
$0.102
$0.319
$0.221
$302.5
$13,344
367,200
95,700
66,300
136,125
$678,669
300,000
$2.262
Products
Manufacturing Costs
CoolDay
LiteMist
Direct materials
Direct labor
Overhead
$0.400
0.250
0.241
$0.984
$1.200
0.500
2.262
$3.962