Question

Schell Company manufactures automobile floor mats. It currently has two product lines, the Standard and the Deluxe. Suppose that Schell has conducted further research into its overhead and potential cost drivers. As a result, the company has compiled the following detailed information, breaking total overhead into three cost pools:
Activity Cost Pools Cost Driver Cost Assigned to Pool Quantity/Amount Consumed by Standard Floor Mat Line Quantity/Amount Consumed by
Deluxe Floor Mat Line
Material handling
Number of moves
$
2,300.00
50 moves
50 moves
Quality control
Number of inspections
$
8,763.00
570 inspections
700 inspections
Machine maintenance
Number of machine hours
$
14,360.00
3,090 machine hours
4,090 machine hours
Required :
1. Calculate the activity rates for each cost pool assuming Schell uses an ABC system. (Round your answers to 2 decimal places.)
Activity Rate
Material Handing
Per Material Move
Quality Control
Per Inspection
Maintenance
Per Machine Hourm
2. Calculate the amount of overhead that Schell will assign to the Standard floor mat line. (Round your intermediate calculations to 2 decimal places.
Total Overhead Assigned
3. Determine the amount of overhead Schell will assign to the Deluxe product line. (Round your intermediate calculations to 2 decimal places.)
Total Overhead Assigned

Answer 1

Answer and Explanation:

The computation is shown below:

1. The activity rate for each cost pool is

Material handling ($2,300) ÷ (50 + 50) = $23.00

Quality Control ($8,763) ÷ ($570  + 700) = $6.90

Machine Maintenance ($14,360)  ÷ (3,090 + 4,090) = $2.00

2    

Total overhead assigned to the standard floor mat line is

= $23 × 40 + $6.9 × 570 + $2 × 3,090

= $1,150 + $3,933 + $6,180

= $11,263.00

3    

Total overhead assigned to deluxe product line

= $23 × 50 +  $6.9 × 700 + $2 × 4,090

= $1,150 + $4,830 + $8,180

= $14,160.00