After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Rey found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.
| Activity |
|
Cost |
Driver |
| Setting up machines |
$ |
14,200 |
20 |
batches |
| Inspecting components |
$ |
4,900 |
4,900 |
parts |
| Providing utilities |
$ |
9,800 |
4,900 |
machine hours |
|
|
Overhead has been applied to output at a rate of 60% of direct labor costs. The following data pertain to Job 6.15.
|
|
|
|
|
| Direct materials |
$ |
2,800 |
|
| Direct labor |
$ |
4,000 |
|
| Batches |
|
7 |
batches |
| Number of parts |
|
460 |
parts |
| Machine hours |
|
570 |
machine hours |
|
| 1. |
Classify each of its three overhead activities as unit level, batch level, product level, or facility level.
|
|
|
| Setting up machines |
Batch level, Unit level or Facility level? |
| Inspecting components |
Facility level, Unit level or Batch level |
| Providing utilities |
Unit level, Batch level or Facility level |
|
| 2. |
What is the total cost of Job 6.15 if Business Solutions applies overhead at 60% of direct labor cost?(Omit the "$" sign in your response.)
|
| 3. |
What is the total cost of Job 6.15 if Business Solutions uses activity-based costing? (Omit the "$" sign in your response.
|