Overhead costs to activity cost pools; activity rates
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Imai Draperies makes custom draperies for homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity cost pools.
Overhead costs:
Production overhead . . . . $240,000
Office expense . . . . . . . . . 160,000
Total . . . . . . . . . . . . . . . . .400,000
Distribution of resource consumption:
Making Job
Activity Cost Pools Drapes Support Other Total
Production overhead 35% 45% 20% 100%
Office expense 15% 55% 30% 100%
The "Other" acticity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Annual Activity
Making drapes . . . . . 4,000 yards
Job support . . . . . . . 100 jobs
Other . . . . . . . . . . . . Not applicable
Required:
a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:
Making Job
Drapes Support Other Total
Production overhead . . .
Office expense . . . . . . .
Total . . . . . . . . . . . . . . .
b. Compute the activity rates (i.e., cost per unit of activity) for the Making Drapes and Job Support activity cost pools by filling in the table below:
Making Job
Drapes Support
Production overhead . . .
Office expense . . . . . . . .
Total . . . . . . . . . . . . . . .
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Solution Summary
Overhead costs to activity cost pools and activity rates are examined.
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