Question:
Lift Jack Company has seven activity cost pools and two products. It expects to produce 200,000 units of its automobile scissors jack and 80,000 units of its truck hydraulic jack. Having identified its activity cost pools and the cost drivers for each cost pool, Lift Jack Company accumulated the following data relative to those activity cost pools and cost drivers.
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Annual Overhead Data
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Activity Cost Pools
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Cost Drivers
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Estimated Overhead
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Ordering and receiving
Machine setup
Machining
Assembling
Inspecting and testing
Painting
Supervising
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Purchase orders
Setups
Machine hours
Parts
Tests
Parts
Direct labor hours
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$ 200,000
600,000
2,000,000
1,800,000
700,000
300,000
1,200,000
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$6,800,000
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Expected Use of Cost Drivers per Product
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Expected Use of Cost Drivers per Activity
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Scissors Jacks
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Hydraulic Jacks
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2,500 orders
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1,000
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1,500
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1,200 setups
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500
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700
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800,000 hours
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300,000
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500,000
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3,000,000 parts
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1,800,000
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1,200,000
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35,000 tests
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20,000
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15,000
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3,000,000 parts
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1,800,000
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1,200,000
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200,000 hours
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130,000
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70,000
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