The following overhead cost information is available for the James Corporation: Activity Allocation Base (Driver) Purchasing Number of purchase orders Overhead Cost $400,000 Receiving Number of shipments received $100,000 Machine setups Number of setups Quality control Number of inspections $400,000 $150,000 During the year, 8,000 purchase orders were issued; 25,000 shipments were received; 4,000 machine setups occurred; and 7,500 inspections were conducted. Employees worked a total of 10,000 hours on production. 1. Determine the overhead rate, using the traditional overhead allocation method based on direct labor hours. 2. Determine the overhead rate for each of the activities, assuming that ABC is used.

The following overhead cost information is available for the James Corporation: Activity Allocation Base (Driver) Purchasing Number of purchase orders Overhead Cost $400,000 Receiving Number of shipments received $100,000 Machine setups Number of setups Quality control Number of inspections $400,000 $150,000 During the year, 8,000 purchase orders were issued; 25,000 shipments were received; 4,000 machine setups occurred; and 7,500 inspections were conducted. Employees worked a total of 10,000 hours on production. 1. Determine the overhead rate, using the traditional overhead allocation method based on direct labor hours. 2. Determine the overhead rate for each of the activities, assuming that ABC is used.

Cornerstones of Cost Management (Cornerstones Series)

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 2CE: Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each...

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Activity Cost Activity Base Procurement $370,000 Number of purchase orders Scheduling 250,000 Number of production orders Materials handling Product development 730,000 500,000 Number of moves Number of engineering changes Production 1,500,000 Machine hours Number of Number of Number Number of Number Purchase Production of Engineering Machine of Orders Orders Moves Changes Hours Units Disk drives 4,000 300 1,400 10 2,000 2,000 Tape drives 4,000 150 800 10 8,000 4,000 Wire drives 12,000 800 4,000 25 10,000 2,500 The activity rate for the scheduling activity cost pool is a.$29.41 per production order b.$200.00 per production order c.$20.00 per production order d.$10.42 per production order
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