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Overhead cost drivers

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The controller for Tulsa Photographic Supply company has established the following activity cost pool and cost drivers

Activity cost pool budgeted overhead cost

machine setup................. $250,000
Material handling.............. 75,000
Hazardous waste control........ 25,000
Quality control................ 75,000
Other overhead costs.......... 200,000

Total....................... $625,000

Cost Driver Budgeted level forcost pool rate
driver

Number of setups.......... 125 $2,000 per setup
Weight of raw material...... 37,000 lb $2 per pound
Weight of hazardous........ 5000 lb $5 per pound
Number of inspection....... 1,000 $75 per inspection
Machine hours.......... 20,000 $10 per machine hr

1. Calculate the unit cost of a production order for 100 specially coated plates used in film development. In addition to direct material costing $120 per plate and direct labor costing $40 pr plate, the order requires following:

Machine setup........................... 3

Raw material............................. 900 punds

Hazardous materials..................... 300 pounds

Inspection.............................. 3

Machine hours........................... 50

2. Build a spreadsheet: Construct an excel spreadsheet to solve the proceeding requirements. Show how the solution will change if the data given in the prceding problem would change as follows: the overhead associated with machine setup is $375,000, and there ae 500 inspections budgeted.

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Solution Summary

Excel file contains calculation of cost of production of specially ordered product using activity based costing (ABC).

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