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Wake Construction manufactures and installs standard and custom-made cabinetry for residential homes. Last year, the company incurred $200,000 in overhead costs. After implementing activity-based costing (ABC), the company's accountant identified the following related information:

Activity Allocation Base Proportion of Overhead Cost
Material delivery and handling Number of deliveries 30%
Inspections Number of inspections 25%
Supervision Hours of supervisor time 20%
Purchasing Number of purchase orders 25%

The number of activities for standard and custom-made cabinets is as follows:

Standard Custom-made
Number of deliveries 200 100
Number of inspections 600 400
Hours of supervisor time 1,800 2,200
Number of purchase orders 1,000 1,000

During the past year, Wake accepted a customer order for a set of custom-made cabinets that would require the following:

Direct labor cost (25 hours at $15 per hour) $375
Direct materials (wood) (900 ft at $3.00 per foot) $2,700
Number of deliveries 3
Number of inspections 5
Hours of supervisor time 5
Number of purchase orders 3

Refer to the Wake Construction information above. How much overhead should be applied to the above customer order?

 

Accounting Basics, Accounting

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