Problem:
Company A has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:
Cost Pool Overhead Costs Cost driver Activity level
Supervision of direct labor $320,000 Direct labor-hours 800,000
Machine maintenance $120,000 Machine-hours 960,000
Facility rent $200,000 Square feet of area 100,000
Total overhead costs $640,000
The accounting records show the ProductA Job consumed the following resources:
Cost driver Actual level
Direct labor-hours 200
Machine-hours 1,600
Square feet of area 50
• If direct labor-hours are considered as the only overhead cost driver, what is the single cost driver rate for Company A?
• Using direct labor-hours as the only overhead cost driver, what is the amount of overhead costs allocated to the ProductA Job?
• If Company A uses the three activity cost pools to allocate overhead costs, what are the activity-cost driver rates for supervision of direct labor, machine maintenance, and facility rent, respectively?
• Using the three cost pools to allocate overhead costs, what is the total amount of overhead costs to be allocated to the ProductA Job?