Farrington, Inc. uses activity-based costing to account for its chrome bumper manufacturing process. Company managers have identified four manufacturing activities: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for the year and their allocation bases are as follows: Requirement 1. Compute the predetermined overhead allocation rate for each activity. Begin by selecting the formula to calculate the predetermined overhead (OH) allocation rate. Then enter the amounts to compute the allocation rate for each activity. (Round your answers to the nearest cent.) Predetermined OH ? ÷ ? = allocation rate Materials handling ? ÷ ? = ? Machine setup ? ÷ ? = ? Insertion of parts ? ÷ ? = ? Finishing ? ÷ ? = ? Requirement 2. Job 86 required the production of 200 bumpers and required one setup. Compute the indirect manufacturing cost allocated to Job 86. Begin by selecting the formula to allocate overhead (OH) costs. ? × ? = Allocated mfg. overhead costs Job 86 required the production of 200 bumpers and required one setup. Compute the indirect manufacturing cost allocated to Job 86. (Round all amounts to the nearest cent.) Job 86: Allocated Mfg. OH Cost Materials handling ? Machine setup ? Insertion of parts ? Finishing ? Total mfg. OH costs ? Activity Total Budgeted Cost Allocation Base Materials handling $3,000 Number of parts Machine setup 3,900 Number of setups Insertion of parts 52,000 Number of parts Finishing 66,000 Finishing direct labor hours Total $124,900 Farrington expects to produce 500 chrome bumpers during the year. The bumpers are expected to use 1,000 parts, require 5 setups, and consume 2,000 hours of finishing time.

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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Farrington,

Inc. uses activity-based costing to account for its chrome bumper manufacturing process. Company managers have identified four manufacturing activities: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for the year and their allocation bases are as follows:

Requirement 1. Compute the predetermined overhead allocation rate for each activity.

Begin by selecting the formula to calculate the predetermined overhead (OH) allocation rate. Then enter the amounts to compute the allocation rate for each activity. (Round your answers to the nearest cent.)

						Predetermined OH
	?	÷	?	=	allocation rate

Materials handling

Machine setup

Insertion of parts

Finishing

Requirement 2. Job 86 required the production of

200 bumpers and required one setup. Compute the indirect manufacturing cost allocated to Job 86.

Begin by selecting the formula to allocate overhead (OH) costs.

Allocated mfg. overhead costs

Job 86 required the production of

200

bumpers and required one setup. Compute the indirect manufacturing cost allocated to Job 86. (Round all amounts to the nearest cent.)

Job 86:	Allocated Mfg. OH Cost
Materials handling	?
Machine setup	?
Insertion of parts	?
Finishing	?
Total mfg. OH costs	?

Activity	Total Budgeted Cost	Allocation Base
Materials handling	$3,000	Number of parts
Machine setup	3,900	Number of setups
Insertion of parts	52,000	Number of parts
Finishing	66,000	Finishing direct labor hours
Total	$124,900

Farrington expects to produce 500 chrome bumpers during the year. The bumpers are expected to use 1,000 parts, require 5 setups, and consume 2,000 hours of finishing time.

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