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…

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 33P: Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs...

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.