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hastings hardwood floors installs oak and other hardwood floors in homes and busines 637630

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.

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