Purchase Orders

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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:...
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