Calculating Activity-Based Costing Overhead Rates

Calculating Activity-Based Costing Overhead
Rates
Assume that manufacturing overhead for
Glassman Company in the previous exercise consisted of the following activities
and costs:
Setup(1,000setup
hours)…………………………………………$146,000
Production Scheduling (400batches)…………………………..60,000
Production Engineering (60 change
orders)…………………90,000
Supervision (2,000 direct labor
hours)………………………….56,000
Machine Maintenance (12,000 machine
hours)…………..96,000
Total Activity
Costs……………………………………………………$460,000
The following additional data were provided
for Job 845:
Direct Materials
Costs…………………………………………………………………………………………$8,000
Direct labor cost (5 Milling direct labor
hours; 35 Finishing direct labor hours)……..1000
Setup
hours………………………………………………………………………………………………………….5 hours
Production
Scheduling……………………………………………………………………………………….. 1 batch
Machine hours used (25 Milling machine
hours;
5 finishing machine
hours)……………………………………………………………………………………30 hours
Production
engineering……………………………………………………………………………………3 change orders

Required
a.
Calculate the cost per unit of
activity driver for each activity cost category.
b.
Calculate the cost of Job 845
using ABC to assign the overhead costs.
c.
Calculate the cost of Job 845
using the plantwide overhead rate based on machine hours calculated in the
previous exercise.
d.
Calculate the cost of Job 845
using a machine hour departmental overhead rate for the Milling Department and
a direct labor hour overhead rate for the Finishing Department
Data for
2014 to solve (d)
Milling Department manufacturing
overhead………………………………………………… $362,000
Finishing Department manufacturing
overhead………………………………………………..130,000
Machine hours used
Milling Department……………………………………………………………………………………10,000
hours
Finishing
Department………………………………………………………………………………….2,000 hours
Labor hours used
Milling
Department……………………………………………………………………………………….1,000 hours
Finishing Department…………………………………………………………………………………….1,000 hours