IGL 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.
Overhead costs:
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Production overhead....
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$140,000
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|
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Office expense.............
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140,000
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|
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Total.............................
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$280,000
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Distribution of resource consumption:
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Activity Cost Pools
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Making Drapes
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Job Support
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Other
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Total
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|
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Production overhead....
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60%
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20%
|
20%
|
100%
|
|
|
Office expense.............
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15%
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55%
|
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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|
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Making drapes.......
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3,000
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yards
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|
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Job support.............
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140
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jobs
|
|
|
Other......................
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Not
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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 Drapes
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Job 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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|
|
|
|
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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 Drapes
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Job Support
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|
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Production overhead....
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|
|
|
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Office expense.............
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|
|
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Total.............................
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c. Prepare an action analysis report in good form of a job that involves making 85 yards of drapes and has direct materials and direct labor cost of $2,990. The sales revenue from this job is $6,000. 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.