Question

In: Accounting

X Company uses an activity-based costing allocation system. On January 1, 2020, its accountant budgeted the...

X Company uses an activity-based costing allocation system. On January 1, 2020, its accountant budgeted the following costs and cost drivers for three of the activities that are used in the ABC system:

Activity Budgeted cost       Cost driver
Assembly $79,000       90,400 parts
Packaging $47,400       14,600 finished units
Purchasing $31,600       4,700 purchase orders

In May of 2020, 600 units of Product C were finished, requiring $13,300 of direct materials, 4,000 direct labor hours, 1,382 parts, and 49 purchase orders.

How much of the three activity costs was allocated to Product C?

Solutions

Expert Solution

Solution

Cost assigned
Assembly $      1,208
Packaging $      1,948
Purchasing $          329

Alternate answer where allocation rate is rounded to 2 decimal.

Cost assigned
Assembly $      1,202
Packaging $      1,950
Purchasing $          329

Working

Calculation of Activity rates
Activity Cost Pool Activity driver Overhead Cost (A) Expected Activity (B) Activity rate (A/B)
Assembly Number of part $ 79,000 90400 $               0.87 Per part
Packaging Number of finished unit $ 47,400 14600 $               3.25 Per finished unit
Purchasing Number of Purchase order $ 31,600 4700 $               6.72 Per Purchase order

.

Cost assigned to Product C
Activity name Activity Rates Activity ABC Cost
(A) (B) (A x B)
Assembly $      0.87                1,382.00 $ 1,202.34
Packaging $      3.25                    600.00 $ 1,950.00
Purchasing $      6.72                      49.00 $ 329.28

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