Phoenix Company Makes Custom Covers for Air Conditioning Units for Homes

Essay

Phoenix Company makes custom covers for air conditioning units 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:
$$\begin{array} { | l | r | } \hline \text { Overhead Costs: } & \\\hline \text { Production overhead } & \$ 100,000 \\\hline \text { Office expenses } & 50,000 \\\hline \text { Total } & \$ 150,000 \\\hline\end{array}$$
Distribution of Resource Consumption:
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Activity Cost Pools }$
$\begin{array} { | l | r | r | r | r | } \hline & \text { Making Cover } & \text { Job Support } & \text { Other } & \text { Total } \\\hline \text { Production overhead } & 40 \% & 42 \% & 18 \% & 100 \% \\\hline \text { Office expenses } & 12 \% & 60 \% & 28 \% & 100 \% \\\hline\end{array}$
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.The amount of activity for the year is as follows:
$$\begin{array} { | l | r | } \hline \text { Activity Cost Paol } & \text { Annual Activity } \\\hline \text { Making covers } & 2,500 \text { yards } \\\hline \text { Job support } & 200 \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 { Making Covers } & \text { Job Support } & \text { Other } & \text { Total } \\\hline \begin{array} { l } \text { Production } \\\text { overhead }\end{array} & & & & \\\hline \text { Office experse } & & & & \\\hline \text { Total } & & & & \\\hline\end{array}$$
b)Compute the activity rates (i.e.,cost per unit of activity)for the Making Covers and Job Support activity cost pools by filling in the table below:
$$\begin{array} { | l | l | l | } \hline & \text { Making Covers } & \text { Job Support } \\\hline \text { Production overhead } & & \\\hline \text { Office expense } & & \\\hline \text { Total } & & \\\hline\end{array}$$
c)Prepare a report in good form of a job that involves making 50 yards of covers and has direct materials and direct labour cost of $1,500.The sales revenue from this job is $2,500.