Question

Everlast Co. manufactures a variety of drill bits. The company's plant is partially automated. The budget for the year includes $660,000 payroll for 8,600 direct labor-hours. Listed below is cost driver information used in the product-costing system: Overhead Cost Pool Budgeted Overhead Cost Driver Estimated Cost Driver Level Machine setups $ 310,000 # of setups 310 setups Materials handling 115,800 # of barrels 9,650 barrels Quality control 1,290,000 # of inspections 3,000 inspections Other overhead cost 1,075,000 # of machine hours 21,500 machine hours Total overhead $ 2,790,800 A current product order has the following requirements: Machine setups 28 setups Materials handling 720 barrels Quality inspections 90 inspections Machine hours 1,700 machine hours Direct labor hour 564 hours Using ABC, how much total overhead is assigned to the order?

Answer 1

Total overheads assigned to order = $203,621.36

Step-by-step explanation:

As for the information provided:

Payroll =
`(660,000)/(8,600) =` = $76.74 per hour

Setups =
`(310,000)/(310)` = $1,000 per setup

Material Handling =
`(115,800)/(9,650)` = $12 per barrel.

Quality Control =
`(1,290,000)/(3,000) =` $430 per inspection.

Other overhead =
`(1,075,000)/(21,500) =` = $50 per machine hour.

Details of current product requirement: And the related expense shall be :

28 setups = 28
`*` $1,000 = $28,000

720 barrels = 720
`*` $12 = $8,640

90 inspections = 90
`*` $430 = $38,700

1,700 machine hours = 1,700
`*` $50 = $85,000

564 labor hours = 564
`*` $76.74 = $43,281.36

Total overheads assigned to order = $203,621.36