Excel Assignment: Activity Based Costing

This exercise will deal with the costing of a product using a predetermined overhead rate and Activity Based Costing (ABC). Please note the different results from using the different methods.

The Sample Company wants to compare the results from the use of a predetermined overhead rate versus Activity Based Costing (ABC). The following are the estimated costs:

Estimated manufacturing overhead $1,000,000.00
Estimated direct labor hours (DLH) 40,000
Predetermined overhead rate (per DLH) $25.00
Mono-Relay Bi-Relay
Time to make one unit (hours) 0.75 1
Estimated units produced 40,000 10,000
Estimated total DLH 30,000 10,000
Direct materials cost per unit $35.00 $48.00
Direct labor cost per unit (at $12 per DLH) $9.00 $12.00
Estimated Overhead Expected Activity
Maintaining parts inventory $180,000.00 225
Processing purchase orders $90,000.00 1000
Quality control $230,000.00 5750
Machine-related $500,000.00 10,000
Total estimated overhead $1,000,000.00
Expected Activity Mono-relay Expected Activity Bi-Relay Total Activity
Maintaining parts inventory 75 150 225
Processing purchase orders 800 200 1,000
Quality control 2,500 3,250 5,750
Machine related 4,000 6,000 10,000

Compute the direct material, direct labor, overhead and total unit cost using the following:

  • Predetermined overhead rate
  • Activity Based Costing (ABC)

Please use the following Excel template: Week 8 ABC TemplatePreview the document


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