Haworth Company is a management consulting firm. The company expects to incur $167,500 of indirect costs this year. Indirect costs are allocated based on the following activities:
Estimated quantity of allocation base
Overhead allocation rate
Number of visits
$ 50 per visit
Number of pages
$ 35 per page
Total Indirect costs
Haworth bills clients at 120% of the direct labor costs. The company has estimated direct labor costs at $240 per hour. Last month, Haworth completed a consulting job for Client 76 and used the following resources:
Allocation Base Client 76
Direct labor hours 60
Determine the total cost of the consulting job and the operating income earned.
Consulting job cost: $16,275
Operating Income: $1,005
Question: Refer to Exercises E19-24 and E19-25. Suppose Western’s direct labor rate was $280 per hour. The Halbert engagement used the following resources last month:
Allocation Base Halbert
Direct labor hours 170
Applications used 80
1. Compute the cost assigned to the Halbert engagement, using the ABC system.
2. Compute the operating income or loss from the Halbert engagement, using theABC system.
The Oakman Company manufactures products in two departments: Mixing and Packaging. The company allocates manufacturing overhead using a single plantwide rate with direct labor hours as the allocation base. Estimated overhead costs for the year are $810,000, and estimated direct labor hours are 360,000. In October, the company incurred 20,000 direct labor hours.
2. Determine the amount of overhead allocated in October.
Koehler makes handheld calculators in two models: basic and professional. Koehler estimated $721,000 of manufacturing overhead and 515,000 machine hours for the year. The basic model actually consumed 230,000 machine hours, and the professional model consumed 285,000 machine hours.
Compute the predetermined overhead allocation rate using machine hours (MHr) as the allocation base. How much overhead is allocated to the basic model? To the professional model?
The following information is provided for Orbit Antenna Corp., which manufactures two products: Lo-Gain antennas and Hi-Gain antennas for use in remote areas.
Activity Cost Allocation Base
Setup $ 58,000 Number of setups
Machine maintenance 30,000 Number of machine hours
Total indirect manufacturing costs $ 88,000
Lo-Gain Hi-Gain Total
Direct labor hours 1,200 3,800 5,000
Number of setups 40 40 80
Number of machine hours 3,000 2,000 5,000
Orbit Antenna plans to produce 125 Lo-Gain antennas and 225 Hi-Gain antennas.
1. Compute the indirect manufacturing cost per unit using direct labor hours for the single plantwide predetermined overhead allocation rate.
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