After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Rey found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows Overhead has been applied to

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After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Rey found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows

After reading an article about activity-based costing in a trade journal

Overhead has been applied to output at a rate of 50% of direct labor costs. The following data pertain to Job 6.15.
Direct materials . . . . . . . . . . . . . . . . . . . . $2,500
Direct labor . . . . . . . . . . . . . . . . . . . . . . . $3,500
Batches . . . . . . . . . . . . . . . . . . . . . . . . 2 batches
Number of parts . . . . . . . . . . . . . . . . . 400 parts
Machine hours . . . . . . . . . . . 600 machine hours

Required
1. What is the total cost of Job 6.15 if Business Solutions applies overhead at 50% of direct labor cost?
2. What is the total cost of Job 6.15 if Business Solutions uses activity-based costing?
3. Which approach to assigning overhead gives a better representation of the costs incurred to produce Job 6.15?Explain

Related Book For answer-question

Fundamental Accounting Principles

20th Edition

Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta

ISBN: 978-0078110870