Brown Company manufactures only one type pf product: XH31. The company uses Activity- Costing system to allocate overhead costs.

The following information are available:

Overhead Costs:

Administrative Wages and Salaries $260,000

Marketing Department Expenses $180,000

Production Department Expenses $310,000

The costs are consumed in the following pattern :

Filling Order Machine Setup Customer Support Others

Administrative wages & salaries 45% 5% 40% 10%

Marketing Department 20% 0% 65% 15%

Production Department 0% 55% 30% 15%

Activity cost pools at B. Brown Company are as follows:

Filling Orders —> Number of orders from customers

Machine Setup—> Number of machine hours

Customer Support —> Number of Active customers

In the current year B. Brown Company received 1100 orders of 34,000 units of product XH31, from a total of 165 regular customers that the company has. B. Brown company uses a special machinery to manufacture product XH31 that had to be set up for about 42 times while manufacturing the product to fulfil the 1100 orders the company received. The special machinery needs 0.75 hours in order to make one unit of Product XH31. In the current year, 34,000 units of product XH31 was produced. In the month of January, the company received 70 orders from 8 different regular customers, the machinery was actively running for 1560 hours, in order to manufacture the XH31 to be able to fulfil the order received.

Required:

a. Prepare the first-stage allocation of overhead costs to the activity cost pools. 

b. Compute the Activity rates for all the activity pools. 

c. Compute the total overhead cost for the product : XH31, only for the month of January. 

Answer rating: 100% (QA)

Complete solution is given below Solution a a First stage allocation of overhead costs Filling order ... View the full answer