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Data Table Activity Predetermined Overhead Allocation Rate Allocation Base $6.00 per part Materials handling Machine setup Insertion of parts Number of parts Number of setups Number of parts 200.00 per setup 25.00 per part Finishing Number of finishing hours 70.00 per hour Standard Deluxe Parts per rim 4.0 6.0 Setups per 500 rims 15.0 15.0 3.0 6.5 Finishing hours per rim Total direct labor hours per rim 5.0 7.0 Data Table In 2025, Eaton's managers used the same indirect manufacturing costs per wheel rim that they computed in 2024 using activity-based costing. In addition to the unit indirect manufacturing costs, the following data are expected for the company's standard and deluxe models for 2025. Standard Deluxe Sales price $ 800.00 1,040.00 Direct materials 31.00 47.00 Direct labor 45.00 54.00 Quantity of Predetermined allocation overhead allocation Allocated activity cost per rim (Deluxe) base used rate = 6.0 $ 6.00 = $ 36.00 ABC cost per unit: Materials handling Machine setups Insertion of parts Finishing direct labor hours 0.030 * $ 200.00 = 6.00 6.0 X $ 25.00 = 150.00 455.00 6.5 A 70.00 = 647.00 Total Eaton Company manufactures wheel rims. The controller budgeted ABC allocation rates for 2024. Eaton produces two wheel rim models: standard and deluxe. Budgeted data for 2024 are as follows: (Click the icon to view the 2024 allocation rates and budgeted data.) E (Click the icon to view additional information, budgeted information and the deluxe unit cost calculation.) More Info Market research shows that for the deluxe rim to provide a reasonable profit, Eaton will have to meet a target manufacturing cost of 703.00 per rim. A value engineering study by Eaton's employees suggests that modifications to the finishing process could cut finishing cost from $70.00 to $60.00 per hour and reduce the finishing direct labor hours per deluxe rim from 6.5 hours to 6.0 hours. Direct materials would remain unchanged at $47.00 per rim, as would direct labor at $54.00 per rim. The materials handling, machine setup, and insertion of parts activity costs also would remain the same. Controller Michael Bender is surprised by the increase in cost of the deluxe model under ABC. He had a market research study conducted. (Click the icon to view the results of the market research.) Would implementing the value engineering recommendation enable Eaton to achieve its target cost for the deluxe rim? Begin by selecting the formula to allocate overhead (OH) costs. Then enter the amounts to calculate the revised finishing activity cost per rim. = Allocated mfg. overhead costs = Data Table Activity Allocation Base Predetermined Overhead Allocation Rate Number of purchase orders $57.00 per purchase order Purchasing Assembling Packaging Number of parts 0.41 per part Number of finished collars 0.10 per collar Requirements 1. 2. 3. Compute the total estimated cost Destiny will incur to purchase the needed materials and then assemble and package 35,000 dog collars. Also compute the cost per collar. For bidding, Destiny adds a 35% markup to total cost. What total price will the company bid for the entire Animal Hut order? Suppose that instead of an ABC system, Destiny has a traditional product costing system that allocates indirect costs at the rate of $9.10 per direct labor hour. The dog collar order will require 12,000 direct labor hours. What total price will Destiny bid using this system's total cost? Use your answers to Requirements 2 and 3 to explain how ABC can help Destiny make a better decision about the bid price it will offer Animal Hut. 4. Destiny Dog Collars uses activity-based costing. Destiny's system has the following features: (Click the icon to view the data table.) Each collar has two parts, direct materials cost is $10.00 per collar, and direct labor cost is $3.00 per collar. Suppose Animal Hut has asked for a bid on 35,000 dog collars. Destiny will issue a total of 125 purchase orders if Animal Hut accepts Destiny's bid. Read the requirements. Requirement 1. Compute the total cost Destiny will incur to purchase the needed materials and then assemble and package 35,000 dog collars. Also compute the cost per collar. (Round the total cost to the nearest dollar and the cost per collar to the nearest cent.) Total manufacturing cost Manufacturing cost per collar Southeast, Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $620,000 of indirect costs this year, and she expects her firm to work 4,000 direct labor hours. Southeast's systems consultants provide direct labor at a rate of $320 per hour. Clients are billed at 160% of direct labor cost. Last month, Southeast's consultants spent 200 hours on Mckoy's engagement. Requirements 1. Compute Southeast's predetermined overhead allocation rate per direct labor hour. 2. Compute the total cost assigned to the Mckoy engagement. 3. Compute the operating income from the Mckoy engagement. Requirement 1. Compute Southeast's predetermined overhead allocation rate per direct labor hour. Select the formula, then enter the amounts to calculate the predetermined overhead (OH) allocation rate. Predetermined OH + = allocation rate