Craftmore Machining reports the following budgeted overhead cost and related data for this year. Activity Budgeted Cost Activity Cost Driver Budgeted Activity Usage Assembly $ 399,750 Direct labor hours (DLH) 13,000 Product design 61,500 Engineering hours (EH) 1,230 Electricity 20,500 Machine hours (MH) 10,000 Setup 51,250 Setups 410 Total $ 533,000 Required: 1. Compute a single plantwide overhead rate assuming the company allocates overhead cost based on 13,000 direct labor hours. 2. Job 31 used 240 direct labor hours and Job 42 used 520 direct labor hours. Allocate overhead cost to each job using the single plantwide overhead rate from part 1.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Craftmore Machining reports the following budgeted
| Activity | Budgeted Cost | Activity Cost Driver | Budgeted Activity Usage |
|---|---|---|---|
| Assembly | $ 399,750 | Direct labor hours (DLH) | 13,000 |
| Product design | 61,500 | Engineering hours (EH) | 1,230 |
| Electricity | 20,500 | Machine hours (MH) | 10,000 |
| Setup | 51,250 | Setups | 410 |
| Total | $ 533,000 |
Required:
1. Compute a single plantwide overhead rate assuming the company allocates overhead cost based on 13,000 direct labor hours.
2. Job 31 used 240 direct labor hours and Job 42 used 520 direct labor hours. Allocate overhead cost to each job using the single plantwide overhead rate from part 1.
3. Compute an activity rate for each activity using activity-based costing.
4. Allocate overhead costs to Job 31 and Job 42 using activity-based costing.
| Activity Cost Driver | Activity Usage | |
|---|---|---|
| Job 31 | Job 42 | |
| Direct labor hours (DLH) | 240 | 520 |
| Engineering hours (EH) | 27 | 33 |
| Machine hours (MH) | 60 | 60 |
| Setups | 5 | 7 |
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