Question

Weirick, Inc., manufactures and sells two products: Product T8 and Product P4. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity

  Expected Activity

Activity Cost Pools   Activity Measures Estimated Estimated Cost Product T8   Product P4 Total  

Labor-related   DLHs $127,500 3,600   1,800 5,400

Production orders Orders 60,110 700 400 1,1004

Order size MHs 940,160   4,000 3,100    7,100 Total: $ 1,127,770

The total overhead applied to Product P4 under activity-based costing is closest to

A) $880,050

B) 410,502

C) 474,860

D) 1,000,270

Answer 1

Correct Answer is C) $ 474,860

Total Overhead Applied to Product P4 = (Labor related rate * 1,800 ) + (Production orders rate * 400 ) + ( Order Size Rate * 3,100 )

Labor related rate = Estimated Overhead / Expected Activity

= $ 127,500 / 5,400

= 23.61

Production order rate = Estimated Overhead / Expected Activity

= $ 60,110/1,100

=54.65

Order size rate = Estimated Overhead / Expected Activity

= $ 940,160 / 7,100

= 132.42

Total Overhead Applied to Product P4 = (23.61 * 1,800 ) + (54.65 * 400 ) + ( 132.42 * 3,100 )

= $ 42,498 + $ 21,860 + $ 410,502

= 474,860