Homework answers / question archive / Alexander Custom Furniture has five indirect-cost pools (purchasing, material handling, machine maintenance, product inspection and packaging)

Alexander Custom Furniture has five indirect-cost pools (purchasing, material handling, machine maintenance, product inspection and packaging)

Accounting

Share With

---

Alexander Custom Furniture has five indirect-cost pools (purchasing, material handling, machine maintenance, product inspection and packaging). The company is in the process of bidding on two jobs:

 

1)  Job 0802: an order of 15 intricate personalised furniture.

 

2)  Job 2408: an order of 6 standard personalised furniture.

 

 

 

The controller wants you to compare overhead allocated under the simple job-costing system and newly designed activity-based job-costing system. Total budgeted costs in each indirect-cost pool and the budgeted quantity of activity driver are as follows:

 

 

 

Budgeted Overhead

 

Activity Driver

 

Budgeted Quantity of Activity Driver

 

Purchasing

 

$70,000

 

Purchase orders processed

 

4,000

 

Material handling

 

$87,500

 

Material moves

 

10,000

 

Machine maintenance

 

$237,300

 

Machine-hours

 

21,000

 

Product inspection

 

$18,900

 

Inspections

 

3,780

 

Packaging

 

$39,900

 

Units produced

 

7,980

 

 

 

$453,600

 

 

 

 

 

 Information related to Job 0802 and Job 2408 follows. Job 0802 incurs more batch-level costs because it uses more types of materials that need to be purchased, moved and inspected relative to Job 2408.

 

 

 

Job 0802

 

Job 2408

 

Number of purchase orders

 

25

 

8

 

Number of material moves

 

10

 

4

 

Machine-hours

 

40

 

60

 

Number of inspections

 

9

 

3

 

Units produced

 

15

 

6

 

 REQUIRED:

 

A)  Determine the overhead rate and the total amount of overhead costs allocated to Job 0802 under a simple costing system, where overhead is allocated based on machine-hours. (4 marks)

 

B)  Determine the overhead rate and the total amount of overhead costs allocated to Job 2408 under an activity-based costing system using the appropriate activity drivers. (11 marks)