A company has identihied the following overheed costs and cost drivers for the coming year Budgeted Level Cost Driver Budgeted Cost S 7,800 69,700 Number of setups 4.100 Inspection Matenal Engineering En Number of material moves hours 13,000 Budgeted direct labor cost was $73,850 and budgeted direct material cost was $211,780. The following information was collected on three jobs thet were completed during the year Direct matenals Direct labor 52400 200 ed Number of setups Number of Inspections Number of meterial moves 10 30 0 50 10 10 Engineering hours If the company uses ectivity-based costing (ABC), how much overhead cost should be assigned to Job 103? O $3,140 O $2,500 O $985 O $1.570 O Type here to search bp
The Correct Answer and Explanation is :
To calculate the overhead cost assigned to Job 103 using Activity-Based Costing (ABC), follow these steps:
Step 1: Determine Overhead Rates for Each Activity
The overhead rate is calculated by dividing the budgeted cost for each activity by the budgeted level of its cost driver.
- Setups:
[
\text{Rate per setup} = \frac{\text{Budgeted cost for setups}}{\text{Number of setups}} = \frac{7,800}{69,700} = 0.112 \text{ per setup.}
] - Inspections:
[
\text{Rate per inspection} = \frac{\text{Budgeted cost for inspections}}{\text{Number of inspections}} = \frac{4,100}{13,000} = 0.315 \text{ per inspection.}
] - Material Moves:
[
\text{Rate per material move} = \frac{\text{Budgeted cost for material moves}}{\text{Number of material moves}} = \frac{13,000}{50} = 260 \text{ per move.}
] - Engineering Hours:
[
\text{Rate per engineering hour} = \frac{\text{Budgeted cost for engineering hours}}{\text{Engineering hours}} = \frac{13,000}{10} = 1,300 \text{ per hour.}
]
Step 2: Assign Overhead to Job 103
Job 103 has the following cost driver usage:
- Setups: 10 setups × 0.112 = 1.12
- Inspections: 30 inspections × 0.315 = 9.45
- Material Moves: 0 moves × 260 = 0.00
- Engineering Hours: 50 hours × 1,300 = 65,000.
Total overhead cost assigned to Job 103 is:
[
\text{Total Overhead} = 1.12 + 9.45 + 0.00 + 65,000 = 66,011
]