Scottso Enterprises has identified the following overhead costs and cost drivers for the coming year: Budgeted direct labor cost was $200,000 and budgeted direct material cost was $800,000.The following information was collected on three jobs that were completed during the month: If the company uses activity-based costing (ABC),how much overhead cost should be assigned to Job B-32?
A)$4,200.
B)$2,600.
C)$2,960.
D)$3,480.

Question

Scottso Enterprises has identified the following overhead costs and cost drivers for the coming year:  Budgeted direct labor cost was $200,000 and budgeted direct material cost was $800,000.The following information was collected on three jobs that were completed during the month:  If the company uses activity-based costing (ABC),how much overhead cost should be assigned to Job B-32?
A)$4,200. 
B)$2,600. 
C)$2,960. 
D)$3,480.

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate based on the total estimated overhead costs and cost driver activity level.
Activity Cost Pool:
Activity Driver:
Total Overhead Cost:
Estimated Activity Level:
Predetermined Overhead Rate:

Machine setup
Number of setups
$150,000
150 setups
$1,000 per setup

Materials handling
Number of material moves
$80,000
10,000 moves
$8 per move

Quality control
Number of inspections
$40,000
200 inspections
$200 per inspection

Total
$270,000
Predetermined overhead rate: $1,208 per direct labor dollar ($270,000 / ($200,000 + $800,000))

Next, we need to allocate the overhead costs to each of the three jobs using the predetermined overhead rate:
Job A-17:
Direct labor cost = $15,000
Direct material cost = $60,000
Total cost = $75,000
Overhead cost = ($15,000 + $60,000) x $1,208 per DL dollar = $83,376

Job B-32:
Direct labor cost = $20,000
Direct material cost = $80,000
Total cost = $100,000
Overhead cost = ($20,000 + $80,000) x $1,208 per DL dollar = $96,454

Job C-41:
Direct labor cost = $18,000
Direct material cost = $72,000
Total cost = $90,000
Overhead cost = ($18,000 + $72,000) x $1,208 per DL dollar = $87,925

Therefore, the overhead cost assigned to Job B-32 is $96,454. The answer is C.

Scottso Enterprises Has Identified the Following Overhead Costs and Cost