Transcribed Image Text: 3.
ACTIVITY-BASED COSTING, COST DRIVERS Southern Metals Companys
controller has established these overhead cost pools and cost drivers for
2001:
Budgeted
Overhead
Expected
Cost Driver
Overhead Cost Pool
Activity Level
Machine setups
$117,868
Number of setups
40
Power
341,120
Machine-hours
21,320
Materials handling
85,000
Materials weight
34,000 Ib.
Quality control
143,500
Number of units
82,000 units
Other overhead
184,500
$871,988
Direct labor-hours
14,760 hours
During March 2001, Southern received an order for 1,500 machine tools and
produced them. The order required the following:
Machine setups
7
Machine-hours
3,250
Materials
4,250 Ib.
Direct labor-hours
2,750 hours
Required
Calculate the predetermined factory overhead rates for cost drivers.
What was the total factory overhead assigned to fill the order under the
activity-based costing approach?
Suppose that a single predetermined factory overhead rate based on
machine-hours was used to apply factory overhead. What was the pre-
determined factory overhead rate? What amount of factory overhead
was applied to the order?
1.
2.
3.
