Problem One

PLANT-WIDE RATE AND ACTIVITY-BASED COSTING (LO 1, 2)

The controller for Crombie Inc. has established the following activity cost pools and cost drivers.

Budgeted Budgeted

Overhead Level for

Activity Cost Pool Cost Cost Driver Cost Driver

Machine setups $350,000 Number of setups 225

Material handling 125,000 Weight of material 25,000 kilograms

Waste control 75,000 Weight of chemicals 7,500 kilograms

Quality control 110,000 Number of inspections 400

Other overhead costs 400,000 Machine hours 30,000

Each order must be a minimum of 1,000 boxes of film chemicals.

The production requirements for each minimum order are as follows:

Machine setups 10 setups

Material handling 2,500 kilograms

Waste Control 300 kilograms

Quality Control 4 inspections

Other Overhead Costs 750 machine hours

Required:

1 Calculate the overhead that should be assigned to each minimum order of film chemicals using the above data.

2 Calculate the overhead that should be assigned to each minimum order of film chemicals if Crombie decides to use a single predetermined overhead rate based on machine hours.