ACC 560 MART Education Terms/acc560mart.com ACC 560 MART Education Terms/acc560mart.com | Page 17
Two activity cost pools were developed: machining and machine setup.
Presented below is information related to the company's operations.
Direct labor costs
Standard
Custom
$50,000
$100,000
Machine hours
Setup hours
1,000
100
1,000
400
Total estimated overhead costs are $240,000. Overhead cost allocated
to the machining activity cost pool is $140,000, and $100,000 is
allocated to the machine setup activity cost pool.
Instructions:
a. Compute the overhead rate using the traditional (plant wide)
approach.
b. Compute the overhead rates using the activity-based costing
approach.
c. Determine the difference in allocation between the two approaches.
E4-6
Santana Corporation manufactures snowmobiles in its Blue
Mountain, Wisconsin, plant. The following costs are budgeted for the
first quarter's operations.
Machine setup, indirect materials
4,000
Inspections
16,000
Tests
4,000
Insurance, plant
110,000