Question #6: Birds and Such, I
Question #6:
Birds and Such, Inc. manufactures birdhouses and uses anactivity-based costing system. The following information isprovided for the month of May:
Activity |
Estimated Indirect Activity Costs |
Allocation Base |
Estimated Quantity of Allocation Base |
Materials handling |
$ 3,500 |
Number of parts |
5,000 parts |
Assembling |
$12,000 |
Number of parts |
5,000 parts |
Packaging |
$5,750 |
Number of birdhouses |
1,250 birdhouses |
Each breadbox consists of 4 parts, and the direct materials costper birdhouse is $7.00.
What is the cost of materials handling and assembling perbreadbox?
Answer:
cost of materials handling and assembling per box = $12.40
Working
Calculation of Activity rates | |||||
Activity Cost Pool | Activity driver | Overhead Cost (A) | Expected Activity (B) | Activity rate (A/B) | |
Materials handling | Number of part | $3,500 | 5000 | $ 0.70 | Per part |
Assembling | Number of part | $12,000 | 5000 | $ 2.40 | Per part |
.
Activity name | Activity Rates | Activity | ABC Cost |
(A) | (B) | (A x B) | |
Materials handling | $ 0.70 | 4.00 | $2.80 |
Assembling | $ 2.40 | 4.00 | $9.60 |
Total Overheads per unit | $ 12.40 |