(LO 3) A company uses activity-based costing to determine the costs of its three products: A,...

(LO 3) A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table:

			Budgeted Activity
Activity Cost Pool	Budgeted Cost		Product A		Product B		Product C
Activity 1	$	89,000		7,900		10,900		21,900
Activity 2	$	64,000		8,900		16,900		9,900
Activity 3	$	120,000		4,400		2,900		3,525

How much overhead will be assigned to Product B using activity-based costing?

Solutions

Expert Solution

Overhead applied on product B = $86,280.11 or 86,280.........(depending on roundoff)

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Activity 1	Number of Activity usage	$ 89,000.00	40700	$ 2.19	Per Activity usage
Activity 2	Number of Activity usage	$ 64,000.00	35700	$ 1.79	Per Activity usage
Activity 3	Number of Activity usage	$ 120,000.00	10825	$ 11.09	Per Activity usage

Cost assigned to Product B
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Activity 1	$ 2.19	10900	$ 23,835.38
Activity 2	$ 1.79	16900	$ 30,296.92
Activity 3	$ 11.09	2900	$ 32,147.81

Total Overheads assigned			$ 86,280.11

ekkarill92 answered 1 month ago

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