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Hamilton Manufacturing Company Direct materials 175,000 Materials handling 35,000 Grinding 300,000 Polishing 100,000 Product Modification 500,000 Providing...

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Accounting

Hamilton Manufacturing Company Direct materials 175,000Materials handling 35,000 Grinding 300,000 Polishing 100,000Product Modification 500,000 Providing Power 225,000 SystemCalibration 400,000 Machine Hours 37,500 units Direct Labor Hours15,000 Engineering hours 1,200 Batches 200 Materials handling basedon direct material cost Grinding based on machine hours Polishingbased on machine hours Product Modification based on engineeringhours Providing Power based on direct labor hours SystemCalibration based on batches Job 231 Completed 1,675 units DirectMaterials 18,500 Direct labor hours 350 Machine hours 755Engineering hours 245 Batches 35 Using the ABC Method find theactivity overhead rates. Once you have those activity rates findthe total cost of Job 231 including materials and the cost perunit

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Solution:

Computation of Activity rates
Activity cost pool Overhead costs Activities Activity Rate
Material Handling $35,000 175000 20% % of Direct material Cost
Grinding $3,00,000 37500 $8.00 Per machine hour
Polishing $1,00,000 37500 $2.67 Per machine hour
Product modification $5,00,000 1200 $416.67 per engineering hour
Providing power $2,25,000 15000 $15.00 per direct labor hour
System Calibration $4,00,000 200 $2,000.00 per batch
Computation of Overhead assigned to Job
Activity Activity Rate Activities Overhead Allocated
Material Handling 20% % of Direct material Cost 18500 $3,700
Grinding $8.00 Per machine hour 755 $6,040
Polishing $2.67 Per machine hour 755 $2,013
Product modification $416.67 per engineering hour 245 $1,02,083
Providing power $15.00 per direct labor hour 350 $5,250
System Calibration $2,000.00 per batch 35 $70,000
Total Cost assigned $1,89,087
Computation of Total cost and Units Cost
Materials Cost $18,500
Allocated cost $1,89,087
Total Costs $2,07,587
No. of units 1675
Cost per unit $123.93
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