Reference no: EM132562481
Zohaib Manufacturing uses a activity based costing system for its manufacturing of fire resilient lucrative cabinet which it markets to main distributors. The company has two overhead departments whose costs are listed below:
Manufacturing overhead $5,00,000
Selling and administrative overhead $300,000
Total overhead costs $8,00,000
The company's activity based costing system has the following activity cost pools and activity measures:
Activity Cost Pool Activity Measures
Assembling units Number of units
Processing orders Number of orders
Supporting customers Number of customers
Other Not applicable
Costs assigned to the "other" activity cost pool have no activity measure; they consist of the costs of unused capacity and organization-sustaining costs - neither of which are assigned to products, orders or customers.
Zohaib Corporation distributes the costs of manufacturing overhead and of selling and administrative overhead to the activity cost pools based on employee interviews, the results of which are reported below:
Distribution of Resource Consumption Across Activity Cost Pools
Assembling Units Processing Orders Supporting Customers Other Total
Manufacturing overhead 50% 35% 5% 10% 100%
Selling and administrative overhead 10% 45% 25% 20% 100%
Total activity 1,000 units 250 orders 100 customers -- --
Required:
Question 1. Perform the first stage allocation of overhead costs to the activity cost pools.
Question 2. Compute activity rates for the activity cost pools.
Question 3. Office Mart is one of the Ferris Corporation's customers. Last year Office Mart ordered filing cabinet four different times. Office Mart ordered a total of 80 cabinets during the year. Construct a table showing the overhead costs of these 80 units and four orders.
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