Question

Everlast Co. manufactures a variety of drill bits. The company's plant is partially automated. The budget for the year includes $432,000 payroll for 4,800 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 $120,000 # of setups 120 setups
Materials handling 104,400 # of barrels 8,700 barrels
Quality control 264,000 # of inspections 1,100 inspections
Other overhead cost 144,000 # of machine hours 12,000 machine hours
Total overhead $632,400

A current product order has the following requirements:

Machine setups 8 setups
Materials handling 606 barrels
Quality inspections 80 inspections
Machine hours 830 machine hours
Direct labor hour 336 hours

Using ABC, how much other overhead is assigned to the order?

a. $9,960.
b. $8,000.
c. $11,108.
d. $45,992.
e. $19,200.

Answer 1

See below

Step-by-step explanation:

Given the above information

Payroll = $432,000 ÷ 4,800 = $90 per hour

Setup = $120,000 / 120 = $1,000 per setup

Material handling barrel = $104,400 / 8,700 = $11.95 per barrel

Quality control inspection = $264,000 / 1,100 = $240 per inspection

Overhead = $144,000 / 12,000 = $12 per machine hour

Details of the current product requirement

8 setup = 8 × $1,000 = $8,000

606 barrels = 606 × $11.95 = $7,242

80 inspections = 80 × $240 = $19,200

830 machine hours = 830 × $12 = $9,960

336 labor hours = 336 × $90 = $30,240

Total overhead assigned to order = $74,642