Setting up equipment $126,000 Number of setups 150
Ordering materials 18,000 Number of orders 900
Machining 126,000 Machine hours 10,500
Receiving 30,000 Receiving hours 1,250
Silven produces two models of cell phones with the following expected activity demands:
Model XModel Y
Units completed 5,000 10,000
Number of setups 100 50
Number of orders 300 600
Machine hours 6,000 4,500
Receiving hours 375 875
Required:
1.Determine the total overhead assigned to each product using the four activity drivers.
2.Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. Show formula. For example, Total cost + proration of least expensive activities = New Cost Pool
3.Using ABC as the benchmark, calculate the percentage error. Round your answers to two decimal places. Explain why this approach may be desirable.
Answer & Explanation
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