A Existing Cost System Two pools Direct Labor 3260015 Overhead 4713982 B System

# A existing cost system two pools direct labor 3260015

This preview shows page 1 - 3 out of 6 pages.

A. Existing Cost System: Two pools Direct Labor - \$3,260,015 Overhead - \$4,713,982 B. System proposed by the accounting manager: Three pools Direct Labor – \$3,260,015 Administrative and Technical Overhead – \$684,603 Other Overhead (testing rooms) – \$4,029,379 (numbers are from exhibit 5) C. System proposed by the consultant: Four pools (one DL and three overhead) Direct Labor – \$3,260,015 Administrative and Technical Overhead – \$684,603 Main Test Room – \$2,103,116 Mechanical Test Room – \$1,926,263 (numbers are from exhibit 5) 1
Step 5. Calculate cost drivers. The direct labor is allocated directly to the lots. The overhead (in either 1, 2 or 3 pools depending on the system) is allocated based on a combination of direct labor dollars and machine hours. Note that these are pre-determined rates based on planned costs and outputs. As a result, Seligram rounds the burden rates somewhat. This is not a good habit to get into, unless a problem tells you to do so. A. Existing Cost System (see exhibit 3): Overhead - \$4,713,982/\$3,260,015 DL ≈ \$1.45/DL\$ (Actual Rate) B. System proposed by the accounting manager (see exhibit 5): Administrative and Technical Overhead – \$684,603/\$3,260,015 DL ≈ \$0.20/DL\$ Other Overhead (testing rooms) – \$4,029,379/50,304 MH ≈ \$80/MH C. System proposed by the consultant: Administrative and Technical Overhead – \$684,603/\$3,260,015 DL ≈ \$0.20/DL\$

#### You've reached the end of your free preview.

Want to read all 6 pages?

• Winter '20