Question

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 $6 per direct labor
Machine processing $2 per machine - hour
Machine setups $45 per setup
Production orders $160 per order
Shipments $115 per shipment
Product sustaining $775 per product

Activity data have been supplied for the following two products:

Total Expected Activity

J78 W52
Direct labor hours 1,000 30
Machine hours 2,600 20
Machine setups 19 3
Production orders 19 3
Shipments 38 3
Product sustaining 3 3

Required:
Determine the total overhead cost that would be assigned to each of the products.

Answer 1

Answer:

Larner Corporation

                                         J78           W52

Total overhead cost    $21,790    $3,505

Explanation:

a) Data and Calculations:

Activity Cost Pool             Activity Rates

Supporting direct labor    $6 per direct labor

Machine processing         $2 per machine - hour

Machine setups                $45 per setup

Production orders            $160 per order

Shipments                        $115 per shipment

Product sustaining          $775 per product

Total Expected Activity

                                      J78     W52

Direct labor hours       1,000      30

Machine hours           2,600      20

Machine setups               19         3

Production orders           19         3

Shipments                      38          3

Product sustaining          3           3

Overhead cost                 Activity rates                     J78           W52

Supporting direct labor    $6 per direct labor         $6,000      $180

Machine processing         $2 per machine - hour    5,200          40

Machine setups                $45 per setup                     855         135

Production orders            $160 per order                 3,040        480

Shipments                        $115 per shipment            4,370        345

Product sustaining          $775 per product             2,325    2,325

Total overhead cost                                              $21,790  $3,505