After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows. Activity Cost DriverSetting up machines$22,410 27batchesInspecting components$4,600 4,600partsProviding utilities$9,200 4,600machine hours Overhead has been applied to output at a rate of 40% of direct labor costs. The following data pertain to Job 615. Direct materials$2,100 Direct labor$3,800 Batches 2batchesNumber of parts 490partsMachine hours 570machine hours 1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level. 2. What is the total cost of Job 615 if Business Solutions applies overhead at 40% of direct labor cost? 3. What is the total cost of Job 615 if Business Solutions uses activity-based costing?

In This Numerical Has Covered the Concept of Activity Based Costing and Traditional Cost for Valuing…

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter2: Job Order Costing

Section: Chapter Questions

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After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.

Activity		Cost	Driver
Setting up machines	$	22,410	27	batches
Inspecting components	$	4,600	4,600	parts
Providing utilities	$	9,200	4,600	machine hours

Overhead has been applied to output at a rate of 40% of direct labor costs. The following data pertain to Job 615.


Direct materials	$	2,100
Direct labor	$	3,800
Batches		2	batches
Number of parts		490	parts
Machine hours		570	machine hours

1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level.

2. What is the total cost of Job 615 if Business Solutions applies overhead at 40% of direct labor cost?

3. What is the total cost of Job 615 if Business Solutions uses activity-based costing?

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