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Calculate the overhead cost per box ordered

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Reference no: EM132561070

The accountant for Click Photography Ltd has estimated the following cost pools and relevant activity drivers for the coming year:

Activity                                      Budgeted Overhead Cost

Machine setups                              $ 300,000

Material Handling                                 $ 150,000

Hazardous waste control                               $ 75,000

Quality control                                             $ 112,000

Other overhead cost                                      $ 300,000

Total                                                            $ 937,500

Activity Driver                                     Budgeted level of Activity Driver

No. of setups                                       100

Weight of raw material                         50 000 kg

Weight of hazardous chemicals used     10 000 kg

No. of inspections                               1 000

Machine hours                                   20 000

An order of 1 000 boxes of film development chemicals has been received, and the order has the following requirements:

Machine setups - 4 setups

Material handling - 10 000 kg

Hazardous waste control - 2 000 kg

Quality control - 10 inspections

Other overhead costs - 500 machine hours

Required:

Applying Activity Based costing:

Question 1: Calculate the total overhead cost that should be assigned to the order.

Question 2: Calculate the overhead cost per box ordered.

Applying a plant-wide pre-determined overhead rate based on machine hours:

Question 3: Calculate the total overhead cost that should be assigned to the order.

Question 4: Calculate the overhead cost per box ordered.

Question 5: Explain why these two product costing systems results in such widely differing costs. Which system do you recommend and why?

Reference no: EM132561070

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