Crafton Manufacturing produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

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
Required
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 costs to assign to the following jobs using ABC.

4. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286?
5. If the company used a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286?
6. Compare the overhead costs per unit computed in requirements 4 and 5 for each job. Which method more accurately assigns overheadcosts?

Transcribed Image Text:

Production Actlvity Indirect Labor Indirect Materials Other Overhead $135,000 Polishing .. Product modification _... Providing power System calibration 600,000 $255,000 500,000 Job 3175 Number of units Machine hours ...550 MH Engineering hours . Job 4286 2,500 units 5,500 MH 200 units .26 eng, hours 32 eng. hours З0 batches 500 DLH 9O batches 4.375 DLH Direct labor hours