e overhead rate
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Question 4.3
Using activity based costing (ABC), calculate the overhead rate for the following activity: Purchasing.
That is, what is the overhead rate per purchase order? NOTE: Enter only the number of dollars, do
not enter the dollar, "$" , symbol. Therefore if your answer is "$10", enter only "10".
Question 37
Question 4.4
Using activity based costing (ABC), calculate the overhead rate for the following activity: Material
delivery and handling. That is, what is the overhead rate per delivery? NOTE: Enter only the number
of dollars, do not enter the dollar, "$" , symbol. Therefore if your answer is "$10", enter only "10".
Transcribed Image Text:Clear Solutions manufactures and installs standard and custom-designed shop windows. Last year,
the company incurred $2,400,000 in overhead costs when a total of 30,000 direct labour hours were
incurred. After implementing activity-based costing (ABC), the company's accountant identified the
following related information:
Allocation
Activity
Proportion of overhead cost
Base
Number of
Purchasing purchase 20%
orders
Material
delivery
and
Number of
10%
deliveries
handling
Hours of
Design
design
time
20%
Hours of
Installation installation 50%
time
The number of activities for standard and custom-made windows is as follows:
Standard
Custom
Number of purchase orders
1,000
1,400
Number of deliveries
200
400
Hours of design time
200
800
Hours of installation time
700
600
During the past year, Clear Solutions accepted order no. 159 for one custom window installation
that would require the following:
Direct labour hours
20
Number of purchase orders
3
Number of deliveries
2
Hours of design time
Hours of installation time
4
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