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6 February, 18:03

Suppose Keyboard estimates it will use 125 comma 000 comma 000 parts per month and ship products with a total volume of 27 comma 500 comma 000 cubic feet per month. Assume that each desktop computer requires 175 parts and has a volume of 9 cubic feet. What are the predetermined overhead allocation rates

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  1. 6 February, 20:59
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    a)

    Kitting: $0.072 per part and Boxing: $0.764 per cubic feet

    b)

    Kitting: $12.6 and Boxing: $6.9

    Explanation:

    Given that Keyboard spends $9,000,000 per month on kitting and $21,000,000 per month on boxing.

    Keyboard estimates it will use 125,000,000 parts per month and ship products with a total volume of 27,500,000 cubic feet per month.

    a) Since Kitting costs based on the number of parts used in the computer:

    The predetermined overhead allocation rate for kitting = Money spent on kitting / number of parts used per month = $9000000 / 125000000 = $0.072 per part

    Since Boxing costs based on the cubic feet of space the computer required:

    The predetermined overhead allocation rate for Boxing = Money spent on Boxing / total = $21000000 / 27500000 = $0.764 per cubic feet.

    a) each desktop computer requires 175 parts and has a volume of 9 cubic feet

    For kitting, Activity cost per desktop = Predetermined overhead allocation rate x quantity per desktop = $0.072 * 175 = $12.6

    For Boxing, Activity cost per desktop = Predetermined overhead allocation rate x quantity per desktop = $0.764 * 9 = $6.9
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