Purchase Orders

Purchase Orders

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: Activity| Allocation Base| Proportion of Overhead Cost| Purchasing| Number of purchase orders| 55%| Inspections| Number of inspections| 20%| Sales| Number of sales orders| 25%| The number of activities for heavy and light duty tents is as follows: | Heavy-duty| | Light-duty| Number of purchase orders| 5,000| | 4,000| Number of inspections| 3,000| | 1,000| Number of sales orders| 800| | 400| Required:

A. | Calculate the total overhead that should be allocated to each of the three activities. Number of purchase 4,950, Number of inspection 800, Number of sales 300| | | B. | Calculate the overhead rates for each of the three activities. Number of purchase 1. 82, Number of inspection 5, Number of sales 4| | | C. | If a single sales order requires 10 purchase orders and 30 inspections to fill, how much overhead should be applied to the order? 1*4+10*1. 82+30*5 = 191. 82| 3. The following overhead cost information is available for Millennium Inc. for 2006: Activity| Allocation Base| Overhead Cost|

Purchasing| Number of purchase orders| $300,000| Machine setups| Number of setups| 150,000| Quality control| Number of inspections| 50,000| During the year, 4,000 purchase orders were issued; 8,000 machine setups were performed; and 2,000 inspections were conducted. Required: A. | Calculate the overhead rates for each of the three activities. Purchasing 75. 00, Machine Setups 18. 75, Quality Control 25| | | B. | If a particular job requires 10 purchase orders, 6 setups, and 5 inspections to fill, how much overhead should be applied to the job? | 10*75+6*18. 75+25*5 = 987. 5