Prepare the first-stage allocation of overhead costs

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Reference no: EM13646435

IGL Draperies makes custom draperies for homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity cost pools.

Overhead costs:

	Production overhead....	$140,000
	Office expense.............	140,000
	Total.............................	$280,000

Distribution of resource consumption:

Activity Cost Pools	Making Drapes	Job Support	Other	Total
Production overhead....	60%	20%	20%	100%
Office expense.............	15%	55%	30%	100%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.

The amount of activity for the year is as follows:

Activity Cost Pool	Annual Activity
Making drapes.......	3,000	yards
Job support.............	140	jobs
Other......................	Not	applicable

Required:

a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:

	Making Drapes	Job Support	Other	Total
Production overhead....
Office expense.............
Total.............................

b. Compute the activity rates (i.e., cost per unit of activity) for the Making Drapes and Job Support activity cost pools by filling in the table below:

	Making Drapes	Job Support
Production overhead....
Office expense.............
Total.............................

c. Prepare an action analysis report in good form of a job that involves making 85 yards of drapes and has direct materials and direct labor cost of $2,990. The sales revenue from this job is $6,000. For purposes of this action analysis report, direct materials and direct labor should be classified as a Green cost; production overhead as a Red cost; and office expense as a Yellow cost.

Reference no: EM13646435

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