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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 | | 5001,200 75,000 |
Number of square feet | 4,000,000 | | 2,000,000 6,000,000 150,000 |
Number of sales orders | 400 | | 100 50075,000 |

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. |
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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-basedcosting 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...