Question

The Gardenview Corporation has identified the following overhead costs and activity drivers for next year: Expected Expected Overhead Item Cost Activity Driver Quantity Setup costs $200,000 Number of setups 250 Ordering costs 80,000 Number of orders 1,600 Maintenance 400,000 Machine hours 2,000 Power 40,000 Kilowatt hours 40,000 The following are two of the jobs completed during the year: Job 6A Job 8B Direct materials $3,000 $4,000 Direct labor $2,800 $4,800 Units completed 100 160 Direct labor hours 50 80 Number of setups 1 4 Number of orders 4 5 Machine hours 20 25 Kilowatt hours 30 50
The company's normal activity is 2,000 direct labor hours. If the four activity drivers are used to allocate overhead costs, total overhead allocated to Job 6A would be

a.$5,533.
b.$5,030.
c.$4,830.
d.$5,630.

Answer 1

Answer:

The correct answer is B.

Explanation:

Giving the following information:

Setup costs $200,000 Number of setups 250

Ordering costs 80,000 Number of orders 1,600

Maintenance 400,000 Machine hours 2,000

Power 40,000 Kilowatt-hours 40,000

Job 6A

Units completed 100

Direct labor hours 50

Number of setups 1

Number of orders 4

Machine hours 20

Kilowatt-hours 30

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate:

Setup= ($200,000/250)= 800 per set up

Ordering costs= (80,000/1,600)= 50 per order

Maintenance= (400,000/2,000)= 200 per machine hour

Power= (40,000/40,000)= $1 per kilowatt hour

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Job 6A:

Set up= 800

Ordering= 50*4= 200

Maintenance= 200*20= 4000

Power= 30

Total= $5030