Calculate the total overhead assigned to the production

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Reference no: EM131774410

Ricoh Printing  Company is the publisher for many of the local newspapers and magazines. They  publish nine periodicals and several other types of literature, including  handouts and pamphlets. They have recently adopted an activity-based costing  system to assign manufacturing overhead to products.  The following data relate to one of their  products, The Rich Weekly, and the  ABC cost pools:

The Ricoh Weekly:

 

Annual production

20,000 units

Direct material per unit

$31

Direct labor per unit

$6

Manufacturing overhead cost pools:

Cost Pool

Cost

Cost Driver

 

Material ordering

$800,000

Number of Purchase orders

Materials inspection

400,000

Number of receiving reports

Equipment setup

2,000,000

Number of setups

Quality control

900,000

Number of inspections

Other

15,000,000

Direct labor cost

Total mfg. overhead

$19,100,000

 

 

Annual activity information related to cost drivers:

 

 

 

Cost Pool

All Products

The Ricoh Weekly

 

Materials ordering

 

100,000 orders

 

1,000

Materials inspection

2,000 receiving reports

300

Equipment setup

100 setups

1

Quality control

4,000 inspections

400

Other

$10,000,000 direct labor

$120,000

Calculate the overhead rate per unit of activity for each of the five cost pools. Calculate the total overhead assigned to the production of The Ricoh Weekly. Calculate the overhead cost per unit for The Ricoh Weekly. Calculate the total unit cost for The Ricoh Weekly. Suppose that Ricoh Printing allocates overhead by a traditional production volume-based method using direct labor dollars as the allocation base and one cost pool. Determine the overhead rate per direct labor dollar and the per unit overhead assigned to The Ricoh Weekly. Discuss the difference in cost allocations between the traditional method and the activity-based costing approach.

Reference no: EM131774410

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