Question

West Horizon uses ABC to account for its chrome wheel manufacturing process. Company managers have identified four manufacturing activities that incur manufacturing overhead​ costs: materials​ handling, machine​ setup, insertion of​ parts, and finishing. The budgeted activity costs for the upcoming year and their allocation bases are as​ follows: LOADING...​(Click the icon to view the budgeted costs and activity​ bases.) West Horizon expects to produce 1 comma 000 chrome wheels during the year. The wheels are expected to use 3 comma 100 ​parts, require 25 ​setups, and consume 2 comma 400 hours of finishing time. Job 420 used 100 ​parts, required 3 ​setups, and consumed 110 finishing hours. Job 510 used 450 ​parts, required 5 ​setups, and consumed 350 finishing hours. Read the requirementsLOADING.... Requirement 1. Compute the cost allocation rate for each activity. First identify the​ formula, then compute the rate for each activity.

Answer 1

Question not well presented:

Materials handling:$8700:Number of parts

Machine setup:$4650:Number of setups

Insertion:of parts:$49,300:number of parts

Finishing:$75,600:Finishing direct labor hours

Total:$138,259

West Horizon expects to produce 1,000 chrome wheels during the year. The wheels are expected to use 3,100 ​parts, require 25 ​setups, and consume 2,400 hours of finishing time. Job 420 used 100 ​parts, required 3 ​setups, and consumed 110 finishing hours. Job 510 used 450 ​parts, required 5 ​setups, and consumed 350 finishing hours

Answer:

For Machine Handling:. = $3 per part

For Machine Setup = $186 per Setup

For Insertion = $16 per part

For Finishing = $31.5 per hour

Explanation:

Cost allocation rate is calculated by:

Total activity overhead/(Total activity allocation base)

For Machine Handling:.

Total Activity Overhead = $8,700

Total Activity Allocation Base = 3,100

So, Cost Rate Allocation = $8,700/3,100

Cost Rate Allocation = 2.806451612903225

Cost Rate Allocation = $3 per part ----- Approximated to the nearest dollar

For Machine Setup

Total Activity Overhead = $4,650

Total Activity Allocation Base = 25

Cost Allocation Rate = $4,650/25

Cost Allocation Rate = $186 per Setup

For Insertion:

Total Activity Overhead = $49,300

Total Activity Allocation Base = 3,100

Cost Allocation Rate = $49,300/3,100

Cost Allocation Rate = $15.90322580645161

Cost Allocation Rate = $16 per part ------ Approximated to the nearest dollar

For Finishing:

Total Activity Overhead = $75,600

Total Activity Allocation Base = 2,400

Cost Allocation Rate = $75,600/2400

Cost Allocation Rate = $31.5 per hour