Question

2)

Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows:

Activity Cost Pools	Total Cost of Pool		Cost Driver	Estimated Cost Driver
Machining	$	380,120	Number of machine hours		88,400
Designing costs		86,400	Number of design hours		9,000
Setup costs		74,672	Number of batches		525

Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows:

	Product A	Product B	Product C
Number of machine hours	34,000	44,000	10,400
Number of design hours	3,600	2,000	3,400
Number of batches	60	180	285

Required:
1. Using activity proportions, determine the amount of overhead assigned to each product.

Answer 1

Ans.	Statement of overhead assigned to each product:
				Product A	Product B	Product C
	Machining cost			146,200	189,200	44,720
	Designing cost			34,560	19,200	32,640
	Set up cost			8,534	25,602	40,536
	Total Overhead			$        189,294	$        234,002	$        117,896

Working Notes:
1). Total Machining cost= 380,120:
Product A =	$380,120 x 34,000/88,400 =			146,200
Product B =	$380,120 x 44,000/88,400 =			189,200
Product C =	$380,120 x 10,400/88,400 =			44,720
2). Total Designing cost= $86,400
Product A =	$86,400 x 3,600/9000 =			34,560
Product B =	$86,400 x 2,000/9000 =			19,200
Product C =	$86,400 x 3,400/9000 =			32,640
2). Total Setup cost= $74,672
Product A =	$74,672 x 60/525 =		8,534
Product B =	$74,672 x 180/525 =		25,602
Product C =	$74,672 x 285/525 =		40,536