Ingersol Draperies Makes Custom Draperies for Homes and Businesses Distribution of Resource Consumption

Essay

Ingersol Draperies makes custom draperies for homes and businesses.The company uses an activity-based costing system for its overhead costs.The company has provided the following data concerning its annual overhead costs and its activity cost pools:
$$\begin{array} { | l | r | } \hline \text { Overhead Costs: } & \\\hline \text { Production overhead } & \$ 120,000 \\\hline \text { Office expense } & 120,000 \\\hline \text { Total } & \$ 240,000 \\\hline\end{array}$$ Distribution of Resource Consumption:
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Activity Cost Pools }$
$\begin{array}{|l|r|r|r|r|}\hline & \text { Making Drapes } & \text { Job Support } & \text { Other } & \text { Total } \\\hline \text { Production overhead } & 35 \% & 45 \% & 20 \% & 100 \% \\\hline \text { Office expenses } & 5 \% & 65 \% & 30 \% & 100 \% \\\hline\end{array}$

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.The amount of activity for the year is as follows:
$$\begin{array} { | l | r | } \hline \text { Activity Cost Pool } & \text { Annual Activity } \\\hline \text { Making drapes } & 2,000 \text { metres } \\\hline \text { Job support } & 160 \text { jobs } \\\hline \text { Other } & \text { Not applicable } \\\hline\end{array}$$
Required:
a)Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:
$$\begin{array} { | l | l | l | l | l | } \hline \text { Answer: } & \text { Making Drapes } & \text { Job Support } & \text { Other } & \text { Total } \\\hline \begin{array} { l } \text { Production } \\\text { overhead }\end{array} & & & & \\\hline \text { Office expense } & & & & \\\hline \text { Total } & & & & \\\hline\end{array}$$
b)Compute the activity rates (i.e.,cost per unit of activity)for the Making Drapes and Job Support activity cost pools by filling in the table below:
$$\begin{array} { | l | l | l | } \hline & \text { Making Drapes } & \text { Job Support } \\\hline \text { Production overhead } & & \\\hline \text { Office expense } & & \\\hline \text { Total } & & \\\hline\end{array}$$
c)Compute the total overhead assigned to a job that involves making 71 metres of drapes.