Consider the following information for Hamburg Corporation:
Units started during the year
Inventory is 100% complete as to materials and 60% complete as to conversion.
Beginning costs (SAR)
Costs added during the period (SAR)
Using the WEIGHTED AVERAGE method:
- Calculate the number of units completed during the period.
- Calculate equivalent units for conversion during the period.
- Calculate cost per equivalent units for materials.
Mannheim Corporation manufactures small camping tents and family camping tents. The estimated direct labor time to produce each type of tent is as follows:
Estimated tents produced
Direct labor hours per tent
Estimated overhead for the period = 1,300,000 SAR.
- Compute the overhead cost assigned to each type of tent assuming direct labor hours are used to allocate overhead costs.
The controller is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the family tent product line because of its complexity. He, therefore, developed the following three activity cost pools and related cost drivers to better understand the costs.
Activity Cost Pools
Expected Use of Cost Drivers
Estimated Overhead Costs (SAR)
Setting up machines
90,000 labor hours
- Calculate the activity-based overhead rates for these three cost pools.
- Compute the cost that is assigned to each tent using activity-based costing system, given the following information.
Expected Use of Cost Drivers per Product
Number of setups
Direct labor hours
Number of inspections
- What do you believe the controller should do and why?