Industries has the following overhead costs and cost drivers. Direct labor hours
ID: 2549608 • Letter: I
Question
Industries has the following overhead costs and cost drivers. Direct labor hours are estimat ed at 100,000 for the year. Ordering and Receiving Machine Setup Machining Assembly Inspection Orders Setups Machine hours Parts Inspections S 120,000 297,000 1,500,000 1,200,000 300,000 500 orders 450 setups 125,000 MH 1,000,000 parts 500 inspections If overhead is applied using activity-based costing, the overthead application rate for ordering and receiving is a. b. c. d. $1.20 per direct labor hour. $240 per order. $0.12 per part. $6,834 per order. 23. An example of an activity cost pool is a. machine hours. b. setting up machines. c. number of setups. d. number of inspections. 4. One of Matheny Company's activity cost pools is inspecting, with estimated overhead of $200,000 Matheny produces throw rugs (700 inspections) and area rugs (1,300 inspections), How much of the inspecting cost pool should be assigned to throw rugs? a. $70,000. b. $100,000 c. $107,692 d. $200,000Explanation / Answer
Ans: b) $ 240 per order
Solution: Overhead Application rate for ordering and receiving are
=($120000/500 orders)
= $ 240 per order
Ans 23:b)setting up machines
Reason: Cost pool is the activity for which cost is ascertained, setting up machine is a activity for which we need to ascertain the cost. All the rest three are cost drivers.
Ans 24: a) $ 70000
Solution: Cost = $ 200000
Total no of activity = 2000 inspections(1300+700)
Cost per activity = $ 100
Total Cost for Throw Rugs =700 x 100 = $ 70000