Problem - Pino Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes.
|
Budgeted Activity of Cost Driver
|
|
Activity (Cost)
|
Cost driver
|
Budgeted Cost
|
Deluxe
|
Moderate
|
Economy
|
|
Machine Maintenance
|
Number of machine hours
|
$480,000
|
250
|
750
|
1,000
|
|
Setups
|
Number of setups
|
$840,000
|
30
|
15
|
5
|
|
Packing
|
Number of cartons
|
$216,000
|
10
|
30
|
50
|
|
Photo development
|
Number of pictures
|
$672,000
|
4,000
|
2,000
|
1,000
|
|
Total Overhead
|
|
$2,208,000
|
|
|
|
Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs.
Moderate texts are made with three colors and few photographs spread through-out each chapter. Economy books are printed in black and white and include pictures only in chapter openings.
1. Pino currently allocates all overhead costs based on machine hours. Calculate the predetermined overhead rate then determine the overhead charged to each type of book.
2. Compute the overhead cost per book under this plantwide overhead allocation system, given that the following number of books was produced during the year: Deluxe=50,000; Moderate=150,000 and Economy=200,000 books.
3. Determine the overhead charged to DELUXE books (only) assuming using an activity-based costing system.
4. Compute the overhead cost per book for DELUXE (only) under this ABC costing system.
What is the predetermined overhead rate if Pino allocated overhead based on machine hours?
How much overhead is allocated to the Deluxe books if Pino used machine hours to allocate the overhead?
What is overhead cost per book (if overhead is allocated based on machine hours) for the Deluxe books?
What is the total overhead charged to deluxe books assuming an ABC costing system? What is the overhead per book for deluxe under this ABC costing system?