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Chapter 07s

7-15&#141 assign overhead costs to activity cost

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Unformatted text preview: 7-15 Assign Overhead Costs to Activity Cost PoolsCustomer Orders Design changes Order Size Customer Relations Other TotalProduction DepartmentIndirect factory wages1,800,000$ Factory equipment depreciation700,000Factory utilitiesFactory building leaseGeneral Administrative DepartmentAdministrative wages and salariesOffice equipment depreciationAdministrative building leaseMarketing DepartmentMarketing wages and salariesSelling expensesTotalActivity Cost PoolsFactory equipment depreciation $3,500,000Percent consumed by customer orders 20%$ 700,000Production DepartmentIndirect factory wages6,000,000$ Factory equipment depreciation3,500,000Factory utilities2,500,000Factory building lease2,000,00014,000,000$ General Administrative DepartmentAdministrative wages and salaries4,000,000Office equipment depreciation900,000Administrative building lease1,100,0006,000,000Marketing DepartmentMarketing wages and salaries1,500,000Selling expenses500,0002,000,000Total overhead costs22,000,000$ Overhead Costs at Baxter Battery(Manufacturing and Nonmanufacturing)7-16Customer Orders Design changes Order Size Customer Relations Other TotalProduction DepartmentIndirect factory wages1,800,000$ 1,800,000$ 1,200,000$ 600,000$ 600,000$ 6,000,000$ Factory equipment depreciation700,000350,0002,100,000-350,0003,500,000Factory utilities-250,0001,500,000-750,0002,500,000Factory building lease----2,000,0002,000,000General Administrative DepartmentAdministrative wages and salaries1,200,000400,000400,0001,200,000800,0004,000,000Office equipment depreciation270,00090,000-180,000360,000900,000Administrative building lease----1,100,0001,100,000Marketing DepartmentMarketing wages and salaries450,000150,000-750,000150,0001,500,000Selling expenses100,000--350,00050,000500,000Total4,520,000$ 3,040,000$ 5,200,000$ 3,080,000$ 6,160,000$ 22,000,000$ Activity Cost Pools Assign Overhead Costs to Activity Cost Pools7-17Ž Calculate Activity RatesThe ABC team determines that Baxter Battery will have these total activities for each activity cost pool:▫10,000 customer orders,▫4,000 design changes,▫800,000 machine-hours,▫2,000 customers served.Now the team can compute the individual activity rates by dividing the total cost for each activity by the total activity levels.7-18(a)(b)(a) ÷ (b)Activity Cost PoolsTotal CostTotal ActivityActivity RateCustomer orders4,520,000$ 10,000 orders$452 per orderDesign changes3,040,0004,000 changes$760 per changeOrder size5,200,000800,000 MHs$6.50 per MHCustomer relations3,080,0002,000 customers$1,540 per customerOther6,160,000Not applicableNot applicableTotal22,000,000$ Computation of Activity RatesŽ Calculate Activity Rates7-19TracedTracedTracedDirectMaterialsDirectLaborShippingCostsOverhead CostsCost Objects:Products, Customer Orders, CustomersActivity–Based Costing at Baxter Battery7-20DirectMaterialsDirectLaborShippingCostsCost Objects:Products, Customer Orders, Customers...
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7-15&#141 Assign Overhead Costs to Activity Cost...

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