Friday 26 September 2014

Larner Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates:

Larner Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates:

  Activity Cost Pool               Activity Rates
  Supporting direct labor   $8  per direct labor-hour
  Machine processing   $4  per machine-hour
  Machine setups   $45  per setup
  Production orders   $160  per order
  Shipments   $110  per shipment
  Product sustaining   $750  per product


     Activity data have been supplied for the following two products:

 
Total Expected Activity
      J78       W52  
  Direct labor-hours 950    40   
  Machine-hours 2,800    30   
  Machine setups 17    1   
  Production orders 17    1   
  Shipments 34    1   
  Product sustaining 1    1   


Required:
Determine the total overhead cost that would be assigned to each of the products. (Omit the "$" sign in your response.)

  Activity Cost Pool                  J78                    W52
  Supporting direct labor $   $  
  Machine processing    
  Machine setups    
  Production orders    
  Shipments    
  Product sustaining    
 

  Total overhead cost $   $  
 






Explanation:
  Activity Cost Pool Activity Rate            Activity ABC Cost
  J78              
  Supporting direct labor   $8  per direct labor-hour 950  direct labor-hours $ 7,600     
  Machine processing   $4  per machine-hour 2,800  machine-hours   11,200     
  Machine setups   $45  per setup 17  setups   765     
  Production orders   $160  per order 17  order   2,720     
  Shipments   $110  per shipment 34  shipment   3,740     
  Product sustaining   $750  per product 1  product   750     
            

Total overhead cost           $ 26,775    
           



  W52              
  Supporting direct labor   $8  per direct labor-hour 40  direct labor-hours $ 320    
  Machine processing   $4  per machine-hour 30  machine-hours   120    
  Machine setups   $45  per setup 1  setups   45    
  Production orders   $160  per order 1  orders   160    
  Shipments   $110  per shipment 1  shipments   110    
  Product sustaining   $750  per product 1  product   750    
            

  Total overhead cost           $ 1,505    
           




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