Question

Cornwell Products has adopted an ABC costing system to allocate its overhead costs. The following manufacturing activities and cost drivers have been​ identified: Activity Estimated OH Costs Esimated amount of allocation base Machine setup ​$180,000 ​2,000 setups Machining ​$1,050,000 ​12,000 machine hours Polishing ​$100,000 ​5,000 polishing cloths Quality control ​$320,000 ​4,000 test runs ​Facility-level costs ​$150,000 ​50,000 DL hours Total overhead costs ​$1,800,000 The job cost record for Job​ #804 revealed the​ following: Direct material​ costs: $1,250 Direct​ labor: 12 hours at a wage rate of​ $30/hr 1 machine setup 6 machine hours 4 polishing clothes 3 quaity control test runs How much overhead would be allocated to Job​ #804 for the quality control​ activity?

Answer 1

$240

Step-by-step explanation:

The computation of the overhead would be allocated to Job​ #804 for the quality control​ activity is shown below:

= Estimated overhead cost of Quality control ÷ Estimated amount of allocation base

= $320,000 ÷ $4,000 test runs

= $80

Now there are 3 quality control test runs

So, the allocated overhead is

= $80 × 3

= $240