Charles and Co. manufactures only one type of product. The company uses Activity- Costing system to allocate
Question:
Charles and Co. manufactures only one type of product. The company uses Activity- Costing system to allocate overhead costs. The following information is available:
Overhead costs of Charles and Co:
Administrative Department Expenses $185,000
Marketing Department Expenses $138,000
Production Department Expenses $266,500
Corporate Operational Expenses $100,000
Distribution of cost pools are as follows :
Filling Orders Machine Setup Customer Support Others Total
Administrative Department Expenses 55% 25% 20% 0% 100% Marketing Department Expenses 35% 15% 40% 10% 100% Production Department Expenses 40% 50% 5% 5% 100% Corporate Operational Expenses 35% 0% 40% 25% 100%
Activity cost pools for the 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, Charles and Co. received a total of 960 orders from it’s customers, from 110 active customers of the company. The company manufactured a total of 28,000 units of finished goods, at a selling price per unit of finished goods is $350. The machinery that is used to manufacture the finished goods was used for a total of 17,900 hours. The machine had to be set up 44 times in total for fulfilling all the 960 orders.
In the month of September, the company received 75 orders from 9 different regular customers, the machinery was actively running for 1565 hours, in order to manufacture the finished goods to be able to fulfil the orders.
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 manufacturing the finished goods, only for the month of September.
