Hi, I'm an accounting student and I am having trouble with a homework problem. I hope I am posting this in the right place. If not, I apologize. Here is the problem:
The following cost information is available for a company:
Activity------------------Allocation Base------------Volume of Act.---Overhead Cost
Purchasing--------------Purchase Orders-----------30,000----------------$150,000
Receiving----------------Shipments Received------15,000----------------$60,000
Machine Setups--------Setups-------------------------2,500-----------------$200,000
Quality Control----------Inspections------------------18,000----------------$90,000
Direct materials are $15 per unit for luxury hand-bags and $11 per unit for the deluxe handbags. There were 12,500 direct labor hours, each of which was charged to inventory at $18 per hour.
Required
Management is trying to decide between using the traditional allocation method based on direct labor hours and using activity-based costing. Calculate the overhead rates for each method.
Check Figures
Traditional = $320
ABC = $252
Here is where I'm getting stuck. I'm trying to calculate using the Traditional method:
Overhead= (total overhead costs/cost driver)
Total overhead costs:
Listed OH costs in the table: $500,000 total
+Dir. Labor Costs: 12,500 hrs x $18/hr = $225,000
+Luxury Handbags = $15 x (unknown # sold)
+Deluxe Handbags = $11 x (unknown # sold)
Don't I need to know how many of each bag were sold in order to complete this problem? The number of each bag sold is not provided.
The following cost information is available for a company:
Activity------------------Allocation Base------------Volume of Act.---Overhead Cost
Purchasing--------------Purchase Orders-----------30,000----------------$150,000
Receiving----------------Shipments Received------15,000----------------$60,000
Machine Setups--------Setups-------------------------2,500-----------------$200,000
Quality Control----------Inspections------------------18,000----------------$90,000
Direct materials are $15 per unit for luxury hand-bags and $11 per unit for the deluxe handbags. There were 12,500 direct labor hours, each of which was charged to inventory at $18 per hour.
Required
Management is trying to decide between using the traditional allocation method based on direct labor hours and using activity-based costing. Calculate the overhead rates for each method.
Check Figures
Traditional = $320
ABC = $252
Here is where I'm getting stuck. I'm trying to calculate using the Traditional method:
Overhead= (total overhead costs/cost driver)
Total overhead costs:
Listed OH costs in the table: $500,000 total
+Dir. Labor Costs: 12,500 hrs x $18/hr = $225,000
+Luxury Handbags = $15 x (unknown # sold)
+Deluxe Handbags = $11 x (unknown # sold)
Don't I need to know how many of each bag were sold in order to complete this problem? The number of each bag sold is not provided.
