Calculating Activity-Based Costing Overhead Rates

Calculating Activity-Based Costing Overhead Rates

Assume that manufacturing overhead for Glassman Company in the previous exercise consisted of the following activities and costs:

Setup(1,000setup hours)…………………………………………$146,000

Production Scheduling (400batches)…………………………..60,000

Production Engineering (60 change orders)…………………90,000

Supervision (2,000 direct labor hours)………………………….56,000

Machine Maintenance (12,000 machine hours)…………..96,000

Total Activity Costs……………………………………………………$460,000

The following additional data were provided for Job 845:

Direct Materials Costs…………………………………………………………………………………………$8,000

Direct labor cost (5 Milling direct labor hours; 35 Finishing direct labor hours)……..1000

Setup hours………………………………………………………………………………………………………….5 hours

Production Scheduling……………………………………………………………………………………….. 1 batch

Machine hours used (25 Milling machine hours;

5 finishing machine hours)……………………………………………………………………………………30 hours

Production engineering……………………………………………………………………………………3 change orders

Required

a. Calculate the cost per unit of activity driver for each activity cost category.

b. Calculate the cost of Job 845 using ABC to assign the overhead costs.

c. Calculate the cost of Job 845 using the plantwide overhead rate based on machine hours calculated in the previous exercise.

d. Calculate the cost of Job 845 using a machine hour departmental overhead rate for the Milling Department and a direct labor hour overhead rate for the Finishing Department

Data for 2014 to solve (d)

Milling Department manufacturing overhead………………………………………………… $362,000

Finishing Department manufacturing overhead………………………………………………..130,000

Machine hours used

Milling Department……………………………………………………………………………………10,000 hours

Finishing Department………………………………………………………………………………….2,000 hours

Labor hours used

Milling Department……………………………………………………………………………………….1,000 hours

Finishing Department…………………………………………………………………………………….1,000 hours