Question

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?

Answer 1

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