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Snavely, Inc., manufactures and sells two products: Product E1 and Product A7. Data concerning the expected...

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Accounting

Snavely, Inc., manufactures and sells two products: Product E1and Product A7. Data concerning the expected production of eachproduct and the expected total direct labor-hours (DLHs) requiredto produce that output appear below:

Expected ProductionDirect Labor-Hours Per UnitTotal Direct Labor-Hours
Product E11,1002.02,200
Product A73001.0300
Total direct labor-hours2,500

The direct labor rate is $21.10 per DLH. The direct materialscost per unit for each product is given below:

Direct Materials
Cost per Unit
Product E1$229.00
Product A7$220.00

The company has an activity-based costing system with thefollowing activity cost pools, activity measures, and expectedactivity:

EstimatedExpected Activity
Activity Cost PoolsActivity MeasuresOverhead CostProduct E1Product A7Total
Labor-relatedDLHs$137,3002,2003002,500
Machine setupssetups64,7301,2003001,500
Order sizeMHs1,012,4202,8003,7006,500
$1,214,450

The total overhead applied to Product E1 under activity-basedcosting is closest to: (Round your intermediatecalculations to 2 decimal places.)

rev: 03_25_2018_QC_CS-119201

Multiple Choice

  • $1,214,465

  • $608,732

  • $523,169

  • $436,128

Answer & Explanation Solved by verified expert
3.8 Ratings (610 Votes)

Correct answer-----------$608,732

Working

Calculation of Activity rates
Activity Cost Pool Activity driver Overhead Cost (A) Expected Activity (B) Activity rate (A/B)
Labor-related Number of DLHs $ 137,300 2500 $             54.92 Per DLH
Machine setups Number of setup $ 64,730 1500 $             43.15 Per setup
Order size Number of MHs $ 1,012,420 6500 $          155.76 Per MH

.

Cost assigned to Product E1
Activity name Activity Rates Activity ABC Cost
(A) (B) (A x B)
Labor-related $           54.92                                                  2,200.00 $ 120824.00
Machine setups $           43.15                                                  1,200.00 $ 51,780.00
Order size $        155.76                                                  2,800.00 $ 436128.00
Total Overheads assigned $           608,732.00

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