Metal Works Corporation has a significant level of manufacturing overhead. After preparing their budget for the next year, management expects the following overhead costs (the cost driver for each overhead cost pool is also shown):ActivityTotal Cost Cost DriverMaintenance$20,000 Machine hoursMaterials receiving48,000 Shipments receivedMachine setups8,000 # of setupsInspection19,200 # of inspectionsThe expected activity for the year for various cost drivers is:Cost DriversExpected ActivityDirect Labor Hours32,000Machine-hours10,000Shipments Received4,000Setups80Quality inspections6,400The company is considering accepting a significant production contract. Estimates for the contract are as follows:Contract EstimateDirect materials$96,000Direct labor ( 640 hours)$128,000Number of material shipments received200Number of inspections320Number of setups8Number of machine-hours1,200How much overhead should be allocated to the contract based on Activity-Based Costing?NOTE: Round all per-unit costs to nearest cent.Select one:a. $4,240b. None of the amounts listed.c. $6,560d. $3,840e. $1,904

c. $6,560Explanation:Overhead Rates for Each Activity:Maintenance (Machine-hours) Rate = $20,000 /…

Answered: Metal Works Corporation has a…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 3BE: Activity-based costing: factory overhead costs The total factory overhead for Bardot Marine Company...

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Question

Metal Works Corporation has a significant level of manufacturing overhead. After preparing their budget for the next year, management expects the following overhead costs (the cost driver for each overhead cost pool is also shown):

Activity	Total Cost	Cost Driver
Maintenance	$20,000	Machine hours
Materials receiving	48,000	Shipments received
Machine setups	8,000	# of setups
Inspection	19,200	# of inspections

The expected activity for the year for various cost drivers is:

Cost Drivers	Expected Activity
Direct Labor Hours	32,000
Machine-hours	10,000
Shipments Received	4,000
Setups	80
Quality inspections	6,400

The company is considering accepting a significant production contract. Estimates for the contract are as follows:

Contract Estimate
Direct materials	$96,000
Direct labor ( 640 hours)	$128,000
Number of material shipments received	200
Number of inspections	320
Number of setups	8
Number of machine-hours	1,200