Purchase Orders
ABC Instructor Assignments
1. Ken's Carpets sells carpet for both residential and business use. To better estimate costs, the company recently adopted an activity-based costing system. Last year, the company incurred $300,000 in overhead costs. Based on an intense study of their company, the following activities, allocation bases, and percentages of overhead costs were determined:
Activity | Allocation Base | Proportion of Overhead Cost | Purchasing | Number of purchase orders | 25% | Materials processing | Number of square feet | 50% | Sales | Number of sales orders | 25% |
The number of activities for residential and business is as follows:
| Residential | | Business Total Total Overhead | Number of purchase orders | 700 | | 500 1,200 75,000 | Number of square feet | 4,000,000 | | 2,000,000 6,000,000 150,000 | Number of sales orders | 400 | | 100 500 75,000 |
Required:
A. | Calculate the total overhead that should be allocated to each of the three activities.Number of Purchase $75,000, Number of square feet $150,000, Number of sales orders $75,000. | | | B. | Calculate the overhead rates for each of the three activities.Number of purchase 62.5, Number of square feet 0.025, Number of sales orders 150 | | | C. | If a particular residential job requires 4 purchase orders and 1 sales order for total of 1,500 square feet of carpet, how much overhead should be allocated to the job? 4*62.5 + 0.025*1,500+1*150 = $437.50 |
2. Mountaineer Tents manufactures and sells heavy and light duty tents to various outdoor retailers. To better estimate costs, the company recently adopted an activity-based costing system. Last year, the company incurred $900,000 in overhead costs. Based on an intense study of their company, the following activities, allocation bases, and percentages of overhead costs were determined:
1. Ken's Carpets sells carpet for both residential and business use. To better estimate costs, the company recently adopted an activity-based costing system. Last year, the company incurred $300,000 in overhead costs. Based on an intense study of their company, the following activities, allocation bases, and percentages of overhead costs were determined:
Activity | Allocation Base | Proportion of Overhead Cost | Purchasing | Number of purchase orders | 25% | Materials processing | Number of square feet | 50% | Sales | Number of sales orders | 25% |
The number of activities for residential and business is as follows:
| Residential | | Business Total Total Overhead | Number of purchase orders | 700 | | 500 1,200 75,000 | Number of square feet | 4,000,000 | | 2,000,000 6,000,000 150,000 | Number of sales orders | 400 | | 100 500 75,000 |
Required:
A. | Calculate the total overhead that should be allocated to each of the three activities.Number of Purchase $75,000, Number of square feet $150,000, Number of sales orders $75,000. | | | B. | Calculate the overhead rates for each of the three activities.Number of purchase 62.5, Number of square feet 0.025, Number of sales orders 150 | | | C. | If a particular residential job requires 4 purchase orders and 1 sales order for total of 1,500 square feet of carpet, how much overhead should be allocated to the job? 4*62.5 + 0.025*1,500+1*150 = $437.50 |
2. Mountaineer Tents manufactures and sells heavy and light duty tents to various outdoor retailers. To better estimate costs, the company recently adopted an activity-based costing system. Last year, the company incurred $900,000 in overhead costs. Based on an intense study of their company, the following activities, allocation bases, and percentages of overhead costs were determined: