West Horizon 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 setup, insertion of parts, and finishing. The budgeted activity costs for the upcoming year and their allocation bases are as follows:
Activity Total Budgeted
....................................................... Manufacturing
...................................................... Overhead Cost Allocation Base
Materials handling . . . . . . . . . . . . . . . . . . . . . . . $ 13,200.............Number of parts
Machine setup . . . . . . . . . . . . . . . . . . . . . . . . . . 5,200...............Number of setups
Insertion of parts . . . . . . . . . . . . . . . . . . . . . . . . 49,500...............Number of parts
Finishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,100...Finishing direct labor hours
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $154,000
West Horizon expects to produce 1,000 chrome wheels during the year. The wheels are expected to use 3,300 parts, require 20 setups, and consume 2,100 hours of finishing time.
Job 420 used 100 parts, required 3 setups, and consumed 140 finishing hours.
Job 510 used 425 parts, required 6 setups, and consumed 350 finishing hours.
Requirements
1. Compute the cost allocation rate for each activity.
2. Compute the manufacturing overhead cost that should be assigned to Job 420.
3. Compute the manufacturing overhead cost that should be assigned to Job 510.