Central Plain uses ABC to account for its chrome wheel
Central Plain uses ABC to account for its chrome wheel manufacturing process. Company managers have identified four manufacturing activities that incur manufacturing overhead costs: materials handling, machine set-up, insertion of parts, and finishing. The budgeted activity costs for the upcoming year and their allocation bases are as follows:
Central Plain expects to produce 1,000 chrome wheels during the year. The wheels are expected to use 2,800 parts, require 20 set-ups, and consume 2,200 hours of finishing time.
Job 420 used 250 parts, required 3 set-ups, and consumed 130 finishing hours.
Job 510 used 475 parts, required 6 set-ups, and consumed 300 finishing hours.
Requirements
1. Compute the cost allocation rate for each activity.
2. Compute the MOH cost that should be assigned to Job 420.
3. Compute the MOH cost that should be assigned to Job 510.
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