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First stage allocation of overhead costs for Advanced Products

Advanced Products Corporation has supplied the following data from its activity-based costing system:
Overheard Cost
Wages and salaries................................$300,000
Other overhead costs.............................100,000
Total overhead costs............................$400,000
Activity Cost Pool Activity Measure Total Activity for the Year
Supporting direct labor...Numbers of direct labor-hours 20,000 DLHs
Order processing......................Number of customer orders 400 orders
Customer support.................. Number of customers 200 customers
Other.............................................. This is an organization sustain activity Not applicable

Distribution of Resources Consumption across Activities
Supporting Order Customer
Direct Labor processing Other Total
Wages and salaries 40% 30% 20% 10% 100%
Other overhead costs 30% 10% 20% 40% 100%
During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises. This customer did not order any other products during the year. Data concerning that order follow:
Data concerning the Shenzhen Enterprises Order
Units order........................................... 10 units
Direct labor-hours............................... 2 DLHs per unit
Selling price........................................... $300 per unit
Direct materials.................................. $180 per unit
Direct labor......................................... $50 per unit

1 Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.
2 Compute the activity rates for the activity cost pools.
3 Prepare a report showing the overhead costs for the order from Shenzhen Enterprises including customer support costs.
4 Prepare a report showing the customer margin for Shenzhen Enterprises.

Solution Summary

The first stage allocation of overhead costs for advanced products are examined.

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