E44 Assigning Costs Using Activity Rates LO 44 Gable Company

E4-4 Assigning Costs Using Activity Rates [LO 4-4 Gable Company uses three activity cost pools. Each pool has a cost driver Information for Gable Company follows Total Cost Activity Cost Pools of Pool Cost Driver 454,960 Number of machine hours Designing costs Setup costs 100,000 Number of design hours 72.720 Number of batches 10,000 505 Suppose that Gable Company manufactures three products, A, B, and C. eformation about these products folows Number of machine hours Number of design hours Number of batches 38.000 4,000 2.200 3,800 10,800 170 Required Using activity rates, determine the amount of overhead assigned to each product. (Round activity rates to 2 decimal places. Round your other intermediate calculations and final answer to the nearest whole dollar amount) Product i 8

Solution

Solution: Total Overhead Assigned Product A 224,349 Product B 272,032 Product C 131,301 Working Notes: Calculation of activity rates Total cost Total no. of activities Activities rates Machining $454,960 96,800 4.70 Designing cost $100,000 10,000 10 Setup cost 72,720 506 143.72 Calculation of Overhead assigned to each products I II III IV=I+II+III Product A Product B Product C Total total machine hrs used 38,000 48,000 10,800 96,800 a Machining rates per machine hour 4.7 4.7 4.7 b total machining OH assigned 178,600 225,600 50,760 454,960 c=axb No. of design hours 4,000 2,200 3,800 10,000 d Designing rate per hour 10 10 10 e total designing OH assigned 40,000 22,000 38,000 100,000 f=dxe No. of batches 40 170 296 506 g setup cost per batch 143.72 143.72 143.72 h total setup cost assigned 5748.80 24432.40 42541.12 72,722.32 i=gxh Hence, Total Overhead Assigned 224,348.80 272,032.40 131,301.12 627,682.32 j=c+f+i Total Overhead Assigned (rounding off) 224,349 272,032 131,301 627,682 Rounding off is done as per Question rounded to nearest whole number the final answer Please feel free to ask if anything about above solution in comment section of the question.