2. a. Overhead rates by activity center:
(a)
Estimated
(b)
(a) ÷ (b)
Predetermined
Overhead
Expected
Activity
Costs
Activity Center
Overhead Rate
Purchasing ... $560,000 2,000 orders $280 per order
Material handling .. $193,000 1,000 setups $193 per setup
Quality control... $90,000 500 batches $180 per batch
Roasting ... $1,045,000 95,000 roasting
hours $11 per roast-
ing hour
Blending... $192,000 32,000 blending
hours $6 per blend-
Packaging ... $120,000 24,000 packaging
hours $5 per pack-
aging hour
Case 8-31 (continued)
Before we can determine the amount of overhead cost to assign to
the products we must first determine the activity for each of the
products in the six activity centers. The necessary computations fol-
low:
Number of purchase orders:
Kenya Dark: 80,000 pounds ÷ 20,000 pounds per order = 4 orders
Viet Select: 4,000 pounds ÷ 500 pounds per order = 8 orders
Number of batches:
Kenya Dark: 80,000 pounds ÷ 5,000 pounds per batch = 16 batches
Viet Select: 4,000 pounds ÷ 500 pounds per batch = 8 batches
Number of setups:
Kenya Dark: 16 batches × 2 setups per batch = 32 setups
Viet Select: 8 batches × 2 setups per batch = 16 setups
Roasting hours:
Kenya Dark: 80,000 pounds × 1.5 roasting hours per 100 pounds =
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