Question

Wings Co. budgeted $571,000 manufacturing direct wages, 2,000 direct labor hours, and had the following manufacturing overhead:

Overhead Cost Pool Budgeted Overhead Cost Budgeted Level for Cost Driver Overhead Cost Driver
Materials handling $ 144,000 4,800 pounds Weight of materials
Machine setup 22,000 550 setups Number of setups
Machine repair 1,580 31,600 machine hours Machine hours
Inspections 16,000 320 inspections Number of inspections
Requirements for Job #971 which manufactured 4 units of product:
Direct labor 20 hours
Direct material: 130 pounds
Machine setup 30 setups
Machine hours 15.000 machine hours
Inspections 15 inspections
Using ABC, overhead cost assigned to Job #971 for machine setup is:
a. $2,300
b. $990
c. $6,500
d. $690
e. $1,020
Using ABC, overhead cost assigned to Job #971 for machine repair is:
a. $2,300
b. $990
c. $6,500
d. $690
e. $1,020

Answer 1

Machine setup= $1,200

Machine repair= $750

Step-by-step explanation:

First, we need to calculate the activities cost rate for each activity:

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

Materials handling= 144,000/4,800= $30 per pound

Machine setup= 22,000/550= $40 per setup

Machine repair= 1,580/31,600= $0.05 per machine hour

Inspections= 16,000/320= $5 per inspection

Now, we can allocate costs to Job 971:

Machine setup= 40*30= $1,200

Machine repair= 0.05*15,000= $750