Craftmore Machining produces machine tools for the construction industry. The following details about overhead cost were take from it's company records
Production Activity Indirect Labor Indirect Materials Other Overhead
Product modification 600,000
Providing power $255,000
System calibration 500,000
Additional information on the drivers for its production activities follows
Grinding 13,000 machine hours
Polishing 13,000 machine hours
Product modification 1,500 engineering hours
Providing power 17,000 direct labor hours
System calibration 400 batches
1) Classify each activity as unit level, batch level, product level or facility level
2) Compute the activity overhead rates using ABC. Form cost pools as appropriate
3) Determine overhead cost to assign to the following jobs using ABC
Job 3175 Job 4286
Number of units 200 units 2,500 units
Machine Hours 550mh 5,500 mh
Engineering hours 26 eng hours 32 eng hours
Batches 30 batches 90 batches
Direct labor hours 500 DLH 4,375 DLH
4) What is the overhead cost per unit for Job 3175? What is the overhead cost per unit Job 4286?
5) If the company used a plantwide overhead rate based in direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286?
6) Compare the overhead cost per unit computer in requirements 4 and for each job. Which method more accurately assigns overhead costs?