Hastings Hardwood Floors installs oak and other hardwood flo…
Hastings Hardwood Floors installs oak and other hardwood floors in 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 based costing system:
Overhead costs:
Production overhead
$110,000
Office expense
130,000
Total
$240,000
Distribution of resource consumption:
Installing
Job
Floors
Support
Activity Cost Pools
50%
30%
Other
Total
Production overhead
5%
65%
20%
100%
Office expense
Installing
Job
30%
100%
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:
Activity Cost Pool
Annual Activity
Installing floors
400 squares
Job support
100 jobs
Other
Not applicable
A “square” is a measure of area that is roughly equivalent to 1,000 square feet.
Required:
a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:
Installing
Job
Floors
Support
Other
Total
Production overhead
Office expense
Total
b. Compute the activity rates (i.e., cost per unit of activity) for the Installing Floors and Job Support activity cost pools by filling in the table below:
Installing
Job
Floors
Support
Production overhead
Office expense
Total
c. Compute the overhead cost, according to the activity-based costing system, of a job that involves installing 1.8 squares.
