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Durban Metal Products Ltd of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers

Durban Metal Products, Ltd., of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers. The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below:

   

  Activity Cost pool   Activity Measure Activity Rate
  Order size   Number of direct labor-hours $ 17.80   per direct labor-hour*
  Customer orders   Number of customer orders $ 366.00   per customer order
  Product testing   Number of testing hours $ 84.00   per testing hour
  Selling   Number of sales calls $ 1,487.00   per sales call
 

  

     The managing director of the company would like information concerning the cost of a recently completed order for heavy-duty trailer axles. The order required 170 direct labor-hours, 10 hours of product testing, and 5 sales calls.

  

The results of the first-stage allocation of the activity-based costing system at Durban Metal Products, Ltd., in which the activity rates were computed, appear below:

   

  Order
Size
Customer
Orders
Product
Testing
Selling
  Manufacturing overhead:                
     Indirect labor $ 10.50       $ 245.00       $ 44.00       $ 0.00     
     Factory depreciation   6.50         0.00         13.00         0.00     
     Factory utilities   .50         0.00         4.00         0.00     
     Factory administration   0.00         44.00         23.00         17.00     
  Selling and administrative:                
     Wages and salaries   .30         65.00         0.00         955.00     
     Depreciation   0.00         12.00         0.00         36.00     
     Taxes and insurance   0.00         0.00         0.00         49.00     
     Selling expenses   0.00         0.00         0.00         430.00     
     
  Total overhead cost $ 17.80       $ 366.00       $ 84.00       $ 1,487.00     
     
 

  

Required:
1.

Prepare a report showing the overhead cost of the order for heavy-duty trailer axles. What is the total overhead cost of the order?

Jun 23 2020 View more View Less

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