1. The order from Interstate Trucking requires 250 direct labor-hours (1,000 units @ 0.25 DLH per unit)
and is run in two batches. Therefore, the overhead cost of the order according to the activity-based
costing system would be computed as follows:
Volume Batch
Processing Order
Processing Total
Activity ... 250 DLHs 2 batches 1 order
Production overhead:
Indirect labor... $ 150.00 $120.00 $ 20.00 $ 290.00
Factory equipment depreciation ... 1,000.00 34.00 0.00 1,034.00
Factory administration... 25.00 14.00 25.00 64.00
General selling and administrative
overhead:
Wages and salaries ... 100.00 40.00 160.00 300.00
Depreciation... 0.00 6.00 10.00 16.00
Marketing expenses ... 112.50 0.00 60.00 172.50
Total cost ... $1,387.50 $214.00 $275.00 $1,876.50
Example: 250 DLHs × $0.60 per DLH from the problem statement = $150.00
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