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1 July, 09:53

The Skagit Company manufactures Hooks and Nooks. The following shows the activities per product and total activity information: Setups Inspections Assembly (dlh) Hooks - 4,000 units 1 3 1 Nooks - 8,000 units 2 2 3 Activity Pool Activity Base Budgeted Activity Cost Setups 20,000 $ 60,000 Inspections 24,000 120,000 Assembly (dlh) 28,000 420,000 Calculate the total factory overhead to be charged to each unit of Hooks.

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  1. 1 July, 10:25
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    Total factory overhead to be charged to each unit of Hooks is $33

    Explanation:

    Sum of all Activity Cost = Total Factory Overhead

    Calculate the total factory overhead to be charged to each unit of Hooks

    Activity rate = Budgeted amount / Total of each activity base

    ∴ Activity Rate

    For Setups = 60,000 / 20,000 = 3 per setup

    For Inspections = 120,000 / 24,000 = 5 per inspections

    For Assembly = 420,000 / 28,000 = 15 per dlh

    Activity Cost = Activity base for each unit * Activity rate

    ∴ Activity Cost

    For Setups = 1 x 3 = $3

    For Inspections = 3 x 5 = $15

    For Assembly = 1 x 15 = $15

    Recall that;

    Sum of all Activity Cost is the Total Factory Overhead

    = $3 + $15 + $15

    = $33
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