Sunland Co. incurs $160000 of overhead costs each year in its three main departments, setup ($10400),...

Sunland Co. incurs $160000 of overhead costs each year in its three main departments, setup ($10400), machining ($106000), and packing ($43600). The setup department performs 40 setups per year, the machining department works 5000 hours per year, and the packing department packs 400 orders per year. Information about Sunland’s 2 products is as follows:

	Product One	Product Two
Number of setups	20	20
Machining hours	900	4100
Orders packed	100	300
Number of product Manufactured	500	500

Using ABC, how much overhead is assigned to Product Two each year?

$80000

$56980

$124820

$103020

Expert Solution

Activity	Overhead Cost	Total activity	Rate per activity	Activity for	Overhead is assigned to
	[1]	[2]	[3]=[1]/[2]	Product Two [4]	Product Two
					[5]=[4]/[3]

Setup	10,400.00	40	260.00	20	5,200
Machining	1,06,000.00	5,000	21.20	4,100	86,920
Packing	43,600.00	400	109.00	300	32,700

Total overhead is assigned to Product Two each year					1,24,820

Therefore, the overhead is assigned to Product Two each year will be $124,820

ekkarill92 answered 2 years ago

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