Lift Jack Company, as shown in Illustration 17-3, page 869, has seven activity cost pools and two products. It expects to produce 200,000 units of its automo- bile scissors jack and 80,000 units of its truck hydraulic jack. Having identified its activ- ity cost pools and the cost drivers for each cost pool, Lift Jack Company accumulated the following data relative to those activity cost pools and cost drivers.

Using the above data, do the following:

(a) Prepare a schedule showing the computations of the activity-based overhead rates per cost driver.

(b) Prepare a schedule assigning each activity's overhead cost to the two products.

(c) Compute the overhead cost per unit for each product.

(d) Comment on the comparative overhead cost per unit.
Data From Illustration 17-3

Transcribed Image Text:

Annual Overhead Data Expected Use of Cost Drivers per Product Activity Cost Pools Ordering and receiving Machine setup Cost Drivers Purchase orders Estimated Overhead $ 200,000 Expected Use of Cost Drivers per Activity Scissors Hydraulic Jacks Jacks 2,500 orders 1,000 1,500 Setups 600,000 1,200 setups $500 700 Machining Machine hours 2,000,000 800,000 hours 300,000 Assembling Parts 1,800,000 3,000,000 parts 1,800,000 500,000 1,200,000 Inspecting and testing Tests 700,000 35,000 tests 20,000 Painting Parts 300,000 3,000,000 parts 1,800,000 15,000 1,200,000 Supervising Direct labor hours 1,200,000 200,000 hours 130,000 70,000 $6,800,000