Accounting 2

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PA 3.

LO 6.2 A local picnic table manufacturer has budgeted these overhead costs:

Purchasing $70,000, Handling materials 33,333, Machine setups 70,500, Inspections 25,500, and Utilities 45,000.

They are considering adapting ABC costing and have estimated the cost drivers for each pool as shown:

Cost Drivers are: Orders, Material moves, Machine setups, Number of inspections, and Square feet. Activities are, respectively: 700, 1,334, 15,000, 5,000, 180,000.

Recent success has yielded an order for 1,000 tables. Assume direct labor costs per hour of $20. Determine how much the job would cost given the following activities:

Order (units) 1,000; Direct materials 112,700; Machine hours 15,200; Direct labor hours 5,300; Number of purchase orders 60; Number of material moves 800; Number of machine setups 100; Number of inspections 450; Number of square feet occupied 8,000.

Accounting 2

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