Problem:
1. Hastings Hardwood Floors installs oak and other hardwood floors in 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 based costing system:
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Overhead costs:
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Production overhead
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$110,000
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Office expense
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130,000
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Total
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$240,000
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Distribution of resource consumption:
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Activity Cost Pools
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Installing Floor
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Job Supports
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Other
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Total
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Production overhead
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50%
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30%
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20%
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100%
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Office expense
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5%
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65%
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30%
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100%
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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:
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Activity Cost Pool
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Annual Activity
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Installing floors
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400 squares
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Job support
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100 jobs
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Other
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Not applicable
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A ""square"" is a measure of area that is roughly equivalent to1,000 square feet.
Required:
a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:
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Installing
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Job
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Floors
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Support
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Other
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Total
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Production overhead
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Office expense
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Total
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b. Compute the activity rates (i.e., cost per unit of activity)for the Installing Floors and Job Support activity cost pools by filling in the table below:
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Installing
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Job
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Floors
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Support
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Production overhead
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Office expense
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Total
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c. Compute the overhead cost, according to the activity-based costing system, of a job that involves installing 1.8 squares.