1. Gregory Enterprises has identified three cost pools to allocate overhead costs.

The following estimates are

provided for the coming year:

Cost Pool Overhead Costs Cost driver Activity level

Supervision of direct labor $320,000 Direct labor-hours 800,000
Machine maintenance $120,000 Machine-hours 960,000
Facility rent $200,000 Square feet of area 100,000
Total overhead costs $640,000

The accounting records show the Mossman Job consumed the following resources:

Cost driver Actual level

Direct labor-hours 200
Machine-hours 1,600
Square feet of area 50
a. Using the ABC approach what is the MOH allocated to the job?
b. If the company uses machine hours as the only cost allocation base, calculate MOH allocated to
the Mossman Job.

2. The following data relates to Luzent Manufacturing:

Activity Cost Driver Cost Total Standard Deluxe
Setups # of setups $ 500,000 500 400 100
Machine-related # machine hours $4,400,000 60,000 30,000 30,000
Packing # shipments $ 5,000,000 250,000 50,000 200,000

What is MOH allocated to the Deluxe and Standard product?

3. All Wood Corporation manufactures dining chairs and tables. The following information is
available:
Dining Chairs Tables Total Cost
Machine setups 200 600 $36,000
Inspections 250 470 $54,000
Labor hours 2,600 2,400

All Wood is considering switching from one overhead rate based on labor hours to activity-based
costing.
Instructions
a. Calculate the total cost allocated to each product using a traditional approach.
b. Calculate the total cost allocated to each product using ABC system.
c. Comment on your findings.

4. The Mercer Company uses a job-costing system at its Farmington, Missouri, plant. The plant
has a Machining Department and a finishing Department. Mercer uses normal costing with two
direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing
overhead cost pools (the Machining department, with machine-hours as the allocation base, and
the finishing department, with direct manufacturing labor costs as the allocation base). The 2009
budget for the plant is as follows:
Machining Department Finishing Department
Manufacturing overhead costs $12,000,000 $10,000,000
Direct manufacturing labor costs $ 1,000,000 $ 5,000,000
Direct manufacturing labor-hours 40,000 200,000
Machine-hours 250,000 55,000

You are required to:

1- What is the budgeted overhead rate in the Machining Department? In the Finishing
Department.
2- During the month of January, the job-cost record for Job 289 shows the following:
Machining Department Finishing Department
Manufacturing overhead costs $15,000 $ 4,000
Direct manufacturing labor costs $650 $ 1,400
Direct manufacturing labor-hours 35 65
Machine-hours 140 15

Compute the total manufacturing overhead allocated to Job 289.