6/4/2021 Assignment Print View

 
1. Award: 10.00 points
 

Hasty Hardwood Floors installs oak and other hardwood floors in homes and businesses. The company uses an activity-based costing system
for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity-based costing
system:
 
Overhead Costs:  
Production overhead $190,000
Office expense 140,000
Total $330,000

Distribution of Resource Consumption:

 
  Activity Cost Pools
  Installing Floors Job Support Other Total
Production overhead 40% 40% 20% 100%
Office expenses 10% 60% 30% 100%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as
follows:
 
Activity Cost Pool Annual Activity
Installing floors 200 squares
Job support 160 jobs
Other Not applicable

A "square" is a measure of area that is roughly equivalent to 1,000 square metres.

Required:

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6/4/2021 Assignment Print View
a) Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:
 
  Installing Floors Job Support Other Total
Production overhead        
Office expense        
Total        

b) Compute the activity rates (i.e., cost per unit of activity) for the Installing Floors and Job Support activity cost pools by filling in the table
below:
 
  Installing Floors Job Support
Production overhead    
Office expense    
Total    

c) Compute the overhead cost, according to the activity-based costing system, of a job that involves installing 3.4 squares.

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6/4/2021 Assignment Print View

a.)                    Installing Floors                  Job Support                  Other.                     Total

Prod. OH       40% = $76,000                   40% = $76,000          20% = $38,000          100% = $190,000
Office exp      10% = $14,000                    60% = $84,000         30% = $42,000          100% = $140,000
Total                 $90,000                                    $160,000                     $80,000                           $330,000
 
b.)            Installing Floors                            Job Support
Prod OH      $950                                              $1187.50
Office exp      $700                                           $875
Total              $1650                                             $2062.50
 
c.) Overhead cost job with 3.4 Squares           
                                             Activity rate                  Activity                ABC Cost
Installing floors                     $1650                            3.4                         $5610
Job Support                          $2062.50                         1                          $2062.50
Other                                            -                                   -                                 - 
                                                                                                                    Total: $7672.50
 

References

Short Answer Learning Objective: 07-02

Assign costs to cost pools
using a first-stage allocation,
and compute activity rates.

Difficulty: Medium Learning Objective: 07-03

Assign costs to a cost object
using a second-stage
allocation.

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