The accountant for Snappy photographic Supply Ltd has estimated the following activity cost pools and activity drivers for the coming year:

An order for 1000 boxes of film development chemicals has the following production requirement:
Machine setups .................................. 4 setups
Raw material ........................... 10 000 kilorams
Hazardous materials ................. 2 000 kilogerams
Inspections ............................... 10 inspections
Machine hours ..................... 500 machine hours
Required:
1. Calculate the total overhead that should be assigned to the order for development chemicals.
2. What is the overhead cost per box of chemicals?
3. If Snappy Photographic Supply Ltd were to use a plant-wide predetermined overhead rate base machine hours, calculate the rate per hour.
4. Under the approach in requirement 3, how much overhead would be assigned to the order for development chemicals:
(a) In total?
(b) Per box of chemicals?
5. Explain why these two product costing systems result in such widely differing costs. Which system do you recommend? Why?
6. Calculate the unit cost of a production order for 100 specially coated plates used in film development. In addition to direct material costing $180 per plate and direct labour costing $60 per plate, the order requires the following:
Machine setups .............................................. 2 setups
Raw material .......................................... 800 kilograms
Hazardous materials ................................... 300 kilograms
Inspections ................................................ 3 inspections
Machine hours....................................... 50 machine hours

Transcribed Image Text:

Budgeted level for activity driver Cost per unit of Budgeted overhead cost Activity driver No. of setups Weight of raw material Weight of hazardous chemicals used No. of inspections Machine hours activity driver $3000 per setup $3 per kilogram Activity Machine setups Material handling Hazardous waste $300 000 150 000 100 50 000 kilograms 10 000 kilograms $7.50 per kilogram $112.50 per inspection $15 per machine hour 75 000 112 500 300 000 control | Quality control Other overhead costs 1 000 20 000 $937 500 Total