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Homework answers / question archive / Brief Exercise 4-7 Spud, Inc

Brief Exercise 4-7 Spud, Inc

Accounting

Brief Exercise 4-7

Spud, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2020.
 

Activity Cost Pools

 

Estimated
Overhead

 

Estimated Use of
Cost Drivers per Activity

Ordering and receiving   $82,812   13,400  orders
Food processing   424,050   55,000  machine hours
Packaging   1,717,840   436,000  labor hours


For 2020, the company had 11,100 orders and used 48,400 machine hours, and labor hours totaled 500,000.

Calculate the overhead rates for each activity. (Round answers to 2 decimal places, e.g. 12.25.)

What is the total overhead applied?
 

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Activity Cost Pools
 
Estimated
Overhead
  ÷  
Expected Use of
Cost Drivers per Activity
  =  
Activity-Based
Overhead Rates
Ordering and receiving   $82,812   13,400  orders   $6.18  per order
Food processing   424,050   55,000  machine hours   $7.71  per machine hour
Packaging   1,717,840   436,000  labor hours   $3.94  per labor hour

 

 

Cost Drivers
  ×  
Overhead
Rates
  =  
Total Overhead
Applied
11,100 orders   $6.18  
$68,598
48,400 machine hours   $7.71  
373,164
500,000 labor hours   $3.94  
1,970,000
       
$2,411,762


[(11,100 x $6.18 = $68,598); (48,400 x $7.71 = $373,164); (500,000 x $3.94 = $1,970,000)]

[(No. of orders x OH rate/hr. = Applied OH); (No. of MH x OH rate/MH = Applied OH); (No. of labor hrs. x OH rate/labor hr. = Applied OH)]