Overhead Costs and Cost Drivers

Overhead Costs and Cost Drivers

Question

Lotus Ltd has identified the following overhead costs and cost

drivers for next year

Overhead Items E ( cost) $

Power 15000

Maintenance cost 7800

Ordering cost 6150

Set ups cost 4500

Cost Driver E( activity)

Number of setups 400

Number of orders 4,000

Machine Hours 5,000

Kilowatt hours 52000

The following is one of the jobs completed during the year

Product A Product B

Direct materials $1200 $1300

Hourly rate 25 30

Units completed 125 150

DLH 140 70

Number of setups 4 6

Number of orders 20 9

Machine hours 250 100

Kilowatt hours 75 48

Actual overhead $1500 $950

The company’s practical activity is 9800 machine hours

REQUIRED

Part 1

Calculate the predetermined rate for the plant using FBC based on machine hours for each job
Calculate total product cost using FBC based on Machine hours for each job
Calculate the unit cost for each Product
Is the overhead over-applied or under-applied?
Part 2

Calculate the predetermined rate for the plant using ABC based on machine hours for each job
Calculate product cost under ABC.
Calculate the unit cost for each Product [ABC]
Is the overhead over-applied or under-applied under ABC?
Compare the result of FBC and ABC.

Overhead Costs and Cost Drivers

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Grading Rubric for Writing Assignment

Your professor may use a slightly different rubric, but the standard rubric at AUR will assess your writing according to the following standards:

 

 

	A (4)	B (3)	C (2)	D/F (1/0)
Focus: Purpose	Purpose is clear	Shows awareness of purpose	Shows limited awareness of purpose	No awareness
Main idea	Clearly presents a	There is a main idea	Vague sense of a	No main idea
	main idea and	supported throughout	main idea, weakly
	supports it	most of the paper.	supported
	throughout the		throughout the
	paper.		paper.
Organization:	Well-planned and	Good overall	There is a sense of	No sense of
Overall	well-thought out.	organization, includes	organization,	organization
	Includes title,	the main	although some of the
	introduction,	organizational tools.	organizational tools
	statement of main		are used weakly or
	idea, transitions and		Missing
	conclusion.
Organization:	All paragraphs have	Most paragraphs have	Some paragraphs	Para. lack clear ideas
Paragraphs	clear ideas, are	clear ideas, are	have clear ideas,
	supported with	supported with some	support from
	examples and have	examples and have	examples may be
	smooth transitions.	transitions.	missing and
			transitions are weak.
Content	Exceptionally well-	Well-presented and	Content is sound and	Content is not sound
	presented and	argued; ideas are	solid; ideas are
	argued; ideas are	detailed, developed	present but not
	detailed, well-	and supported with	particularly
	developed,	evidence and details,	developed or
	supported with	mostly specific.	supported; some
	specific evidence &		evidence, but
	facts, as well as		usually of a
	examples and		generalized nature.
	specific details.
Research (if	Sources are	Sources are well	Sources support	The paper does not
assignment	exceptionally well-	integrated and	some claims made in	use adequate
includes a	integrated and they	support the paper’s	the paper, but might	research or if it does,
research	support claims	claims. There may be	not be integrated	the sources are not
component)	argued in the paper	occasional errors, but	well within the	integrated well.
	very effectively.	the sources and	paper’s argument.	They are not cited
	Quotations and	Works Cited conform	There may be a few	correctly according
	Works Cited	to MLA style sheet.	errors in MLA	to MLA style, nor
	conform to MLA		style..	listed correctly on
	style sheet.			the Works Cited
				page.
Style: Sentence	Sentences are clear	Sentences are clear	Sentences are	Sentences aren’t
structure	and varied in	but may lack	generally clear but	clear
	pattern, from simple	variation; a few may	may have awkward
	to complex, with	be awkward and there	structure or unclear
	excellent use of	may be a few	content; there may
	punctuation.	punctuation errors.	be patterns of
			punctuation errors.
Style: Word	There is clear use of	There is an attempt at	There is little	No attempt at style
choice, Tone	a personal and	a personal style but	attempt at style;
	unique style of	style of writing may	reads as flat and
	writing, suited to	be awkward or	perhaps
	audience and	unsuited to audience	uninteresting in
	purpose; the paper	and purpose; the	content, which is
	holds the reader’s	reader may lose	usually generalized
	interest with ease.	interest in some	and clichéd.
		sections of the paper.
Style: Details	Large amounts of	Some use of specific	Little use of specific	No use of examples
and Examples	specific examples	examples and	examples and
	and detailed	detailed descriptions.	details; mostly
	descriptions.	May have extended	generalized
		examples that go on	examples and little
		for too long.	description.
Grammar &	Excellent grammar,	A few errors in	Shows a pattern of	Continuous errors
Mechanics	spelling, syntax and	grammar, spelling,	errors in spelling,
	punctuation.	syntax and	grammar, syntax
		punctuation, but not	and/or punctuation.
		many.	Could also be a sign
			of lack of proof-

Overhead Costs and Cost Drivers