The controller for Norton Machining has established the following overhead cost pools and cost drivers:

Order no. 715 has the following production requirements:
Machine setups: 7
Raw material: 11,200 units
Inspections: 16
Machine hours: 850
Required:
A. Compute the total overhead that should be assigned to order no. 715 by using activity-based costing.
B. Suppose that Norton were to use a single, predetermined overhead rate based on machine hours. Compute the rate per hour and the total overhead assigned to order no. 715.
C. Discuss the merits of an activity-based costing system in comparison with a traditional costing system.

Question

The controller for Norton Machining has established the following overhead cost pools and cost drivers:
  
Order no. 715 has the following production requirements:
Machine setups: 7
Raw material: 11,200 units
Inspections: 16
Machine hours: 850 
Required: 
A. Compute the total overhead that should be assigned to order no. 715 by using activity-based costing.
B. Suppose that Norton were to use a single, predetermined overhead rate based on machine hours. Compute the rate per hour and the total overhead assigned to order no. 715.
C. Discuss the merits of an activity-based costing system in comparison with a traditional costing system.

Quizplus · Accepted Answer

The Answer of The controller for Norton Machining has established the following overhead cost pools and cost drivers:
  
Order no. 715 has the following production requirements:
Machine setups: 7
Raw material: 11,200 units
Inspections: 16
Machine hours: 850 
Required: 
A. Compute the total overhead that should be assigned to order no. 715 by using activity-based costing.
B. Suppose that Norton were to use a single, predetermined overhead rate based on machine hours. Compute the rate per hour and the total overhead assigned to order no. 715.
C. Discuss the merits of an activity-based costing system in comparison with a traditional costing system.

The Controller for Norton Machining Has Established the Following Overhead