Question

Required information Problem 17-3A Applying activity-based costing LO P1, P3, A1, A2, C3 [The following information applies to the questions displayed below.] Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records. Production Activity Indirect Labor Indirect Materials Other Overhead Grinding $ 320,000 Polishing $ 135,000 Product modification 600,000 Providing power $ 255,000 System calibration 500,000 Additional information on the drivers for its production activities follows. Grinding 13,000 machine hours Polishing 13,000 machine hours Product modification 1,500 engineering hours Providing power 17,000 direct labor hours System calibration 400 batches Job 3175 Job 4286 Number of units 200 units 2,500 units Machine hours 550 MH 5,500 MH Engineering hours 26 eng. hours 32 eng. hours Batches 30 batches 90 batches Direct labor hours 500 DLH 4,375 DLH Problem 17-3A Part 5 Required: 5. If the company uses a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286? (Do not round intermediate calculations. Round "OH Cost per unit" answers to 2 decimal places.)

Answer 1

Answer:

Craft Pro Machining

The overhead cost for each unit of the jobs:

                                    Job 3175        Job 4286

Number of units          200 units      2,500 units

Direct labor hours      500 DLH       4,375 DLH

Plantwide overhead rate = $371.28205

Overhead allocation $185,641.03   $1,624,358.97

Unit overhead cost    $928.21         $649.74

Explanation:

a) Data and Calculations:

Production Activity    Indirect Labor   Indirect Materials  Other Overhead Grinding                      $ 320,000

Polishing                      $ 135,000

Product modification     600,000

Providing power        $ 255,000

System calibration        500,000

Total overhead cost $1,810,000

Additional information on the drivers for its production activities follows.

Grinding                           13,000    machine hours

Polishing                          13,000    machine hours

Product modification        1,500     engineering hours

Providing power             17,000     direct labor hours

System calibration             400      batches

                                  Job 3175        Job 4286

Number of units          200 units      2,500 units

Machine hours            550 MH        5,500 MH

Engineering hours        26 eng. hours 32 eng. hours

Batches                         30 batches      90 batches

Direct labor hours      500 DLH       4,375 DLH   4,875 DLH

Plantwide overhead rate based on direct labor hours:

= Total overhead costs/Total direct labor hours

= $1,810,000/4,875

= $371.28205