Question - The accountant for Scenic Photographic Supply Company has established the following overhead cost pools and activity drivers.
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Overhead Cost Pool
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Budgeted Overhead Cost
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Activity Driver
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Machine set-ups
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$100,000
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Number of setups
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Material handling
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$50,000
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Weight of raw material
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Hazardous waste control
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$25,000
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Weight of hazardous chemicals used
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Quality control inspection
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$37,500
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Number of inspections
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Other overhead costs
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$100,000
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Machine hours
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Total
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$312,500
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|
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Overhead Cost Pool
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Budgeted Level for Activity Driver
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Overhead Rate
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Machine set-ups
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100
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$1,000 per setup
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Material handling
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50,000 kilos
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$1 per kilo
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Hazardous waste control
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10,000 kilos
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$2.50 per kilo
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Quality control inspection
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1,000
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$37.50 per inspection
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Other overhead costs
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20,000
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$5 per machine hour
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An order for 1,000 boxes of film development chemicals has the following production requirements:
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Machine set-ups
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4 Set-ups
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Raw material
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l0,000 kilos
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Hazardous materials
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2,000 kilos
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Inspections
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10 inspections
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Machine hours
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500 machine hours
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Required
1. Calculate the total overhead that should be assigned to the development chemical order.
2. What is the overhead cost per box of chemicals?
3. Suppose Scenic Photographic Supply Company was to use a single, predetermined overhead rate based on machine hours. Calculate the rate per hour.
4. Using the single plantwide rate, what is the total overhead assigned and the overhead cost per box of chemicals?
5. Discuss the merits of an activity-based overhead costing system.