Question

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 $91,476 12,600 orders Food processing 535,680 64,000 machine hours Packaging 1,514,040 444,000 labor hours For 2020, the company had 11,400 orders and used 50,900 machine hours, and labor hours totaled 510,000. Calculate the overhead rates for each activity. (Round answers to 2 decimal places, e.g. 12.25.) Overhead Rates Ordering and receiving $ per order Food processing $ per machine hour Packaging $ per labor hour eTextbook and Media What is the total overhead applied

Answer 1

Results are below.

Step-by-step explanation:

To calculate the overhead activity rate, we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Ordering and receiving= 91,476/12,600= $7.26 per order

Food processing= 535,680/64,000= $8.37per machine hour

Packaging= 1,514,040/444,000= $3.41 per labor hour

Now, we can apply overhead:

Ordering and receiving= 7.26*11,400= $82,764

Food processing= 8.37*50,900= $426,033

Packaging= 3.41*510,000= $1,739,100