Phoenix Company Makes Custom Covers for Air Conditioning Units for Homes

question 31

Essay

Phoenix Company makes custom covers for air conditioning units for 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 cost pools:
$$\begin{array} { | l | r | } \hline \text { Overhead Costs: } & \\\hline \text { Production overhead } & \$ 100,000 \\\hline \text { Office expenses } & 50,000 \\\hline \text { Total } & \$ 150,000 \\\hline\end{array}$$
Distribution of Resource Consumption:
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Activity Cost Pools }$
$\begin{array} { | l | r | r | r | r | } \hline & \text { Making Cover } & \text { Job Support } & \text { Other } & \text { Total } \\\hline \text { Production overhead } & 40 \% & 42 \% & 18 \% & 100 \% \\\hline \text { Office expenses } & 12 \% & 60 \% & 28 \% & 100 \% \\\hline\end{array}$
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.The amount of activity for the year is as follows:
$$\begin{array} { | l | r | } \hline \text { Activity Cost Paol } & \text { Annual Activity } \\\hline \text { Making covers } & 2,500 \text { yards } \\\hline \text { Job support } & 200 \text { jobs } \\\hline \text { Other } & \text { Not applicable } \\\hline\end{array}$$
Required:
a)Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:
$$\begin{array} { | l | l | l | l | l | } \hline & \text { Making Covers } & \text { Job Support } & \text { Other } & \text { Total } \\\hline \begin{array} { l } \text { Production } \\\text { overhead }\end{array} & & & & \\\hline \text { Office experse } & & & & \\\hline \text { Total } & & & & \\\hline\end{array}$$
b)Compute the activity rates (i.e.,cost per unit of activity)for the Making Covers and Job Support activity cost pools by filling in the table below:
$$\begin{array} { | l | l | l | } \hline & \text { Making Covers } & \text { Job Support } \\\hline \text { Production overhead } & & \\\hline \text { Office expense } & & \\\hline \text { Total } & & \\\hline\end{array}$$
c)Prepare a report in good form of a job that involves making 50 yards of covers and has direct materials and direct labour cost of $1,500.The sales revenue from this job is $2,500.

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Definitions:

Right of First Refusal

A contractual right that gives its holder the option to enter a business transaction with the owner of something before the owner is entitled to enter into that transaction with a third party.

Share Certificate

A physical document issued by a company that certifies ownership of a specific number of shares or stock in that company.

Shareholder

An individual or entity that owns shares in a corporation, holding a portion of the company's stock and potentially influencing its governance.

Model Nonprofit Corporation Act

A standardized legislative framework designed to provide guidelines for the formation, operation, and governance of nonprofit organizations.