Response to the following problem:
Julio Manufacturing Company uses activity-based costing. The factory overhead budget for the coming period is $500,000, consisting of the following:
Cost Pool Budgeted Amount
Direct labor support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000
Machine support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Machine setups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Design changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000
The potential allocation bases and their estimated amounts were as follows:
Cost Pool Budgeted Amount
Number of design changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Number of setups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 10,000
Direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Required:
1. Determine the overhead rate for each cost pool, using the most appropriate allocation base for each pool.
2. Job 2525 required $25,000 for direct materials, $10,000 for direct labor, 500 direct labor hours, 1,000 machine hours, five setups, and three design changes. Determine the cost of Job 2525.