Chapter 4, Problem 4.20AE

Compute activity rates and apply to jobs (Learning Objective 2)

Fuller Company uses ABC to account for its chrome wheel manufacturing process. Company managers have identified four manufacturing activities that incur manufacturing overhead costs: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for the upcoming year and their allocation bases are as follows:

Activity	Total Budgeted Manufacturing Overhead Cost	Allocation Base
Materials handling	$ 12,000	Number of parts
Machine setup	3,400	Number of setups
Insertion of parts	48,000	Number of parts
Finishing	80,000	Finishing direct labor hours
Total	$143,400

Fuller Company expects to produce 1,000 chrome wheels during the year. The wheels are expected to use 3,000 parts, require 10 setups, and consume 2,000 hours of finishing time.

• Job 420 used 200 parts, required 2 setups, and consumed 130 finishing hours.
• Job 510 used 425 parts, required 4 setups, and consumed 350 finishing hours.

Requirements

1. 1. Compute the cost allocation rate for each activity.
2. 2. Compute the manufacturing overhead cost that should be assigned to Job 420.
3. 3. Compute the manufacturing overhead cost that should be assigned to Job 510.