Problem:
Imai 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.
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Overhead costs:
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Production overhead
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$240,000
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Office expense
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160,000
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Total
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$400,000
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Distribution of resource consumption:
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Making
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Job
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Activity Cost Pools
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Drapes
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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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35%
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45%
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20%
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100%
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Office expense
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15%
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55%
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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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Making drapes
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4,000 yards
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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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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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Making
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Job
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Drapes
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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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|
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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 Making Drapes and Job Support activity cost pools by filling in the table below:
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Making
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Job
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Drapes
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Support
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Production overhead
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|
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Office expense
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Total
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c. Prepare an action analysis report in good form of a job that involves making 53 yards of drapes and has direct materials and direct labor cost of $1,480. The sales revenue from this job is $5,200. 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.