Calculate activity rate for general factory overhead using direct labor hours.How much of the $2,496,500 manufacturing overhead would be allocated to the Delta product?How much would be allocated to the sigma product? has the following estimates for 2019:EstimatedExpectedActivity50,000 MHsActivity Cost Pool Activity MeasureMachine related machine hoursMachine setups number of setupsPurchase orders number of ordersGeneral factory direct labor hoursOverhead Cost$1,500,000$300,000$192,500$504,000$2,496,500750 setups3,500 orders36,000 DLHSTotalsActivity Measuremachine hoursProduct DeltaProduct Sigma28,00035022,000400number of setupsnumber of orders1,9001,600direct labor hours.20,00016,000

Activity-Based Costing: It is the method of costing which is used to assign indirect costs to the activities and thereby to the products. In the above method, indirect costs or manufacturing overhead are applied based on a single rate, but in real life, a company will be working on more than one job or product. In such cases, it is better to assign indirect cost based on actual usage of cost by any activity. Steps in Activity-Based Costing: 1. Calculation of Allocation Rate Per Activity: Here, we will calculate the rate per activity of the production process. We will divide the total activity cost by the total activity level. 2. Calculation of Total Activity Cost for each product: Here, we will calculate the total cost of each activity by multiplying the allocation rate per activity with the number of activity levels for each product. 3. Calculation of Total Overhead Cost per unit: Here, we will add the total cost of all the activity for each job and divide it by the number of units produced. Step 1: Calculation of Allocation Rate per Activity: As discussed above, the way in which we have to calculate the rate per activity. Let us calculate it as under: Here, we divided each activity given with their respective activity levels as given in the problem. Step 2: Calculation of Total Manufacturing Overhead for Each Product: As discussed above, let us calculate the total manufacturing overhead for each product as under: For Product Delta: Therefore, the total overhead cost that is allocated to Product Delta is $1,364,500. For Product Stigma: Therefore, the total overhead cost that is allocated to Product Stigma is $1,132,000.

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Calculate activity rate for general factory overhead using direct labor hours. How much of the $2,496,500 manufacturing overhead would be allocated to the Delta product? How much would be allocated to the sigma product?

Calculate activity rate for general factory overhead using direct labor hours. How much of the $2,496,500 manufacturing overhead would be allocated to the Delta product? How much would be allocated to the sigma product?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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