After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey decides to analyze overhead cost at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of the company's overhead. Additional information about overhead follows. Activity Set up Inspection Utilities Total Budgeted Cost $ 20,000 7,500 10,000 $ 37,500 The following data pertain to Job 615. Direct materials. Direct labor Overhead Setups Parts inspected Machine hours $ 2,500 $ 3,500 $ Budgeted Activity Usage 25 setups 5,000 parts inspected 5,000 machine hours (MH) 2 setups 400 parts inspected 600 machine hours Required: 1. Classify each of the three overhead activities as unit level, batch level, product level, or facility level. 2. Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,000 machine hours. Compute total product cost of Job 615. 3. Assume Business Solutions uses activity-based costing. (a) Compute overhead activity rates. (b) Allocate overhead cost to Job 615. (d Compute total product cost of lol
After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey decides to analyze overhead cost at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of the company's overhead. Additional information about overhead follows. Activity Set up Inspection Utilities Total Budgeted Cost $ 20,000 7,500 10,000 $ 37,500 The following data pertain to Job 615. Direct materials. Direct labor Overhead Setups Parts inspected Machine hours $ 2,500 $ 3,500 $ Budgeted Activity Usage 25 setups 5,000 parts inspected 5,000 machine hours (MH) 2 setups 400 parts inspected 600 machine hours Required: 1. Classify each of the three overhead activities as unit level, batch level, product level, or facility level. 2. Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,000 machine hours. Compute total product cost of Job 615. 3. Assume Business Solutions uses activity-based costing. (a) Compute overhead activity rates. (b) Allocate overhead cost to Job 615. (d Compute total product cost of lol
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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How do I solve for the chart on Required 3?

Transcribed Image Text:ces
Machine hours
Required:
1. Classify each of the three overhead activities as unit level, batch level, product level, or facility level.
2. Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,000 machine hours. Compute total product
cost of Job 615.
3. Assume Business Solutions uses activity-based costing. (a) Compute overhead activity rates. (b) Allocate overhead cost to Job 615.
(c) Compute total product cost of Job 615.
Required 1 Required 2
a. Compute overhead activity rates
Activity
Setup
Inspection
Utilities
Assume Business Solutions uses activity-based costing. (a) Compute overhead activity rates. (b) Allocate overhead cost to Job
615. (c) Compute total product cost of Job 615. (Round "Activity Rate" to 2 decimal places.)
2
Direct Materials
Direct Labor
Overhead
Product Cost
per setup
per part
per MH
b. Allocate overhead to Job 615 based on actual activity usage
Activity
Allocated Cost
Setup
Inspection
Utilities
Total allocated cost
$
0
c. Total product cost of Job 615 based on activity-based costing
Job 615
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600 machine hours
Required 3
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Transcribed Image Text:es
After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey decides to analyze
overhead cost at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up
most of the company's overhead. Additional information about overhead follows.
Activity
Set up
Inspection
Utilities
Total
The following data pertain to Job 615.
Direct materials
Direct labor
Overhead
Setups
Parts inspected
Machine hours
2
Required 1
Budgeted Cost
$ 20,000
Required:
1. Classify each of the three overhead activities as unit level, batch level, product level, or facility level.
2. Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,000 machine hours. Compute total product
cost of Job 615.
Department
3. Assume Business Solutions uses activity-based costing. (a) Compute overhead activity rates. (b) Allocate overhead cost to Job 615.
(c) Compute total product cost of Job 615.
Job 615
7,500
10,000
$ 37,500
F2
Required 2
Job 615
Total product cost of Job 615
W
Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,000 machine hours. Compute total
product cost of Job 615. (Round "Overhead rate" to 2 decimal places.)
Allocate overhead to Job 615 using plantwide rate
Machine Hours
Used
$
#
3
$ 2,500
$ 3,500
Plantwide
Overhead Rate
Direct Materials
20
F3
E
2 setups
400 parts inspected
600 machine hours
Required 3
S D
Budgeted Activity Usage
25 setups
5,000 parts inspected
5,000 machine hours (MH)
Direct Labor
4
F4
R
F
Overhead Allocated
Overhead
%
5
Product Cost
$
Ų
F5
T
G
0
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DII
F8
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(
9
F9
K
-O
O
0
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