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.ActivityBudgeted CostBudgeted Activity UsageSet up$ 20,00025setupsInspection7,5005,000parts inspectedUtilities10,0005,000machine hours (MH)Total$ 37,500 The following data pertain to Job 615.Direct materials$ 2,500 Direct labor$ 3,500 Overhead$ _________blank Setups2setupsParts inspected400parts inspectedMachine hours600machine hoursRequired:Classify each of the three overhead activities as unit level, batch level, product level, or facility level.Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,000 machine hours. Compute total product cost of Job 615.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.

The three overhead activities can be classified as follows:Set up costs: These are batch level costs…

Answered: After reading an article about…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

Classify each of the three overhead activities as unit level, batch level, product level, or facility level.
Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,000 machine hours. Compute total product cost of Job 615.
Assume Business Solutions uses activity-based costing.
1. (a) Compute overhead activity rates.
2. (b) Allocate overhead cost to Job 615.
3. (c) Compute total product cost of Job 615.