Question

The controller for Tulsa Medical Supply Company has established the following activity cost pools and cost drivers.
Activity Cost Pool Budgeted Overhead Cost Cost Driver Budgeted Level for Cost Driver Pool Rate
Machine setups $ 250,000 Number of setups 125 $ 2,000 per setup
Material handling 75,000 Weight of raw material 37,500 lb. $2 per pound
Hazardous waste control 25,000 Weight of hazardous chemicals used 5,000 lb. $ 5 per pound
Quality control 75,000 Number of inspections 1,000 $ 75 per inspection
Other overhead costs 200,000 Machine hours 20,000 $ 10 per machine hour
Total $ 625,000
Required:
1. Calculate the unit cost of a production order for 100 specially coated plates used in cancer testing. In addition to direct material costing $120 per plate and direct labor costing $40 per plate, the order requires the following: (Round intermediate calculations and final answer to 2 decimal places.)
Machine setups 3
Raw material 900 pounds
Hazardous materials 300 pounds
Inspections 3
Machine hours 50

Answer 1

Answer:

Tulsa Medical Supply Company

1. Calculation of the unit cost of a production order for 100 specially coated plates used in cancer testing:

Direct materials           $120 * 100 plates =               $12,000

Direct labor                     40 * 100 plates =                   4,000

Overhead:

Machine setups           $2,000 * 3  setups   $6,000

Material handling          $2 * 900 pounds        1,800

Hazardous control        $5 * 300 pounds        1,500

Quality control               $75 * 3  inspections    225

Other overheads     $10 * 50 machine hours  500

Total overheads applied                                           $10,025

Total manufacturing cost for 100 plates                 $26,025

Unit cost = $26,025/100 = $260.25 per plate

Explanation:

a) Data and Calculations:

Activity Cost Pool   Budgeted        Cost Driver              Budgeted Level for

                             Overhead Cost                                Cost Driver Pool Rate

Machine setups     $ 250,000        Number of setups 125 $ 2,000 per setup

Material handling 75,000               Weight of raw material 37,500 lb. $2 per pound

Hazardous waste control 25,000  Weight of hazardous chemicals used 5,000 lb. $ 5 per pound

Quality control 75,000                   Number of inspections 1,000 $ 75 per inspection

Other overhead costs 200,000    Machine hours 20,000 $ 10 per machine hour

Total $ 625,000