Ken's Carpets Sells Carpet for Both Residential and Business Use

Essay

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:
$\begin{array}{ll}\text { Activity } & \text { Allocation Base }&\text { Proportion of Overhead Cost } \\\hline \text { Purchasing } & \text { Number of purchase orders } &25\%\\\text { Materials processing } & \text { Number of square feet }&50\% \\\text { Sales } & \text { Numher of sales orders }&25\%\end{array}$

The number of activities for residential and business is as follows:
$\begin{array}{lrr} &\underline{\text { Residential}} &\underline{ \text { Business} } \\ \text {Number of purchase orders } &700&500\\ \text { Number of square feet } &4000000&2000000\\\text { Numher of sales ntrlere }&400&100\end{array}$

Required:
A. Calculate the tatal cverhead that should be allocated to each af the three actrites.
B. Calculate the averhead rates for each of the three activities.
C. If a particular residential job reqquires 4 purchase arders and 1 sales arder far tatal af 1500 square feet of carpet how much cverhead should be allocated to the job?