Reference no: EM132506999

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity                  Indirect Labor           Indirect Materials              Other Overhead

Grinding                                $320,000

Polishing                                                                    $135,000

Product modification                                                                                        600,000

Providing power                     $255,000

System calibration                   500,000

Additional information on the drivers for its production activities follows.

Grinding: 13,000 machine hours

Polishing: 13,000 machine hours

Product modification 1,500 engineering hours

Providing power 17,000 direct labor hours

System calibration 400 batches

Question 1: Classify each activity as unit level, batch level, product level, or facility level.

Question 2: Compute the activity overhead rates using ABC. Combine the grinding and polishing activities into a single cost pool.

Question 3: Determine the overhead costs to assign to the following jobs using ABC.      

                     Job 3175:                       Job 4286:

Number of units  200 units               2,500 units

Machine hours 550 MH                         5,500 MH

Engineering hours 26 eng. hours          32 eng. hours

Batches 30 batches                           90 batches

Direct labor hours 500 DLH                     4,375 DLH

Question 4: What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286?

Question 5: If the company uses plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286?

Question 6: Compare the overhead costs per unit computed in requirements 4 and 5 for each job. Which method more accurately assigns overhead costs?