Reference no: EM132853067

Question - Spark Architects, a Calgary-based architecture firm, designs and constructs buildings. It prices each job on a cost plus 25% basis. Overhead costs in 2020 are $9,900,000. Spark's simple costing system allocates overhead costs to its jobs based on number of jobs. There were three jobs in 2020. One customer, Eeny, (each job is named after the customer) has complained that the cost and price of its building in Edmonton was not competitive.

Recently, Spark's controller, Megan Moe, has initiated a detailed review of the overhead allocation to determine if overhead costs should be charged to jobs in proportion to consumption of overhead resources by jobs. She gathers the following information:

Quantity of Cost Drivers Used by Each Job Overhead

Activity Cost Driver Costs in 2020 Eeny Meeny Miny

Design Design department hours $6,000,000 4,000 22,000 16,000

Engineering Number of engineering hours $1,500,000 6,000 4,000 6,750

Construction Labor-hours $2,400,000 25,000 18,000 22,000 $9,900,000

a) Using the ABC system, compute the activity rate for each activity?

b) Compute the overhead allocated to each job in 2020 using the ABC system?