Question

Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates:

Activity Cost Pool Activity Rates
Supporting direct labor $6 per direct labor
Machine processing $2 per machine - hour
Machine setups $45 per setup
Production orders $160 per order
Shipments $115 per shipment
Product sustaining $775 per product

Activity data have been supplied for the following two products:

Total Expected Activity

J78 W52
Direct labor hours 1,000 30
Machine hours 2,600 20
Machine setups 19 3
Production orders 19 3
Shipments 38 3
Product sustaining 3 3

Required:
Determine the total overhead cost that would be assigned to each of the products.

Answer 1

Larner Corporation

J78 W52

Total overhead cost $21,790 $3,505

Step-by-step explanation:

a) Data and Calculations:

Activity Cost Pool Activity Rates

Supporting direct labor $6 per direct labor

Machine processing $2 per machine - hour

Machine setups $45 per setup

Production orders $160 per order

Shipments $115 per shipment

Product sustaining $775 per product

Total Expected Activity

J78 W52

Direct labor hours 1,000 30

Machine hours 2,600 20

Machine setups 19 3

Production orders 19 3

Shipments 38 3

Product sustaining 3 3

Overhead cost Activity rates J78 W52

Supporting direct labor $6 per direct labor $6,000 $180

Machine processing $2 per machine - hour 5,200 40

Machine setups $45 per setup 855 135

Production orders $160 per order 3,040 480

Shipments $115 per shipment 4,370 345

Product sustaining $775 per product 2,325 2,325

Total overhead cost $21,790 $3,505