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Brief Exercise 4-7 Spud, Inc
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 |
Estimated Use of |
|||
| 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?
Expert Solution
|
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)]
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