The Molotov plant of Kaboom Industries has two categories of overhead: maintenan
ID: 2546654 • Letter: T
Question
The Molotov plant of Kaboom Industries has two categories of overhead: maintenance and inspection.
Costs expected for these categories for the coming year are as follows:
Maintenance
$50,000
Inspection
75,000
The plant currently applies overhead using direct labor hours and expected capacity of 50,000 direct labor hours. The following data have been assembled for use in developing a bid for a proposed job:
Direct materials
$500
Direct labor
$2,000
Machine hours
500
Number of inspections
4
Direct labor hours
800
Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500.
Using activity-based costing and the appropriate activity drivers, the total cost of the potential job would be
$3,875.
$1,200.
$1,800.
$3,700.
Maintenance
$50,000
Inspection
75,000
Explanation / Answer
Answer is D
Working Note
Particulars Amt (A) Direct materials 500.00 Direct labor 2,000.00 Inspection Cost (50 x 4) 200.00 Maintenance (500 x 2) 1,000.00 Total Cost 3,700.00