EXERCISE 7-6 Second –Stage Allocation to an Order
Transvaal Mining Tools Ltd. Of South Africa makes specialty tools used in the mining industry .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 pools Activity Measure Activity Rate
Order size Number of direct labor-hours R17.60 per direct labor –hour*
Customer order Number of Customer order R360 per customer order
Product testing Number of testing hours R79 per testing hour
Selling Number of Seles calls R1,494 per sales call
*(The currency in South Africa is the rand hear by R )
The managing director of the company would like information concerning the cost of a recently completed order for hard-rock drills. The order required 150 direct labor-hours , 18 hours of product testing ,and three sales calls .
Required;
Prepare a report summarizing the overhead cost assigned to the order for hard-rock drills. what is the total overhead assigned to the order?