Question

In: Accounting

Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using...

Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information: Activity Cost Driver Amount M XY Production setups Number of setups $ 77,000 8 12 Material handling Number of parts 56,000 56 14 Packaging costs Number of units 203,000 84,000 56,000 $ 336,000 What is the total overhead allocated to Product XY using the current system?

Multiple Choice

$138,600.

$201,600.

$134,400.

$197,400.

Expert Solution

Sol. Calculation of the total Overhead Cost allocated to Product XY using the Current System-

Total Overhead Cost/Total Number of Produced*Number of unit of product XY

$336,000 /140,000 Unit's * 56,000 unit's

$2.4 per unit X 56,000 unit's

$134,400

Total Overhead Allocated to product XY =$134,400

Option (C.) $ 134,400

Working Note :

Total Number of units produced

Number of unit's of Product M+Number of units of product XY

84,000 Unit's+ 56,000 units=140,000 unit's

Total Overhead Cost =>

Production Setup Cost +Material Handling cost + Packaging cost

$77,000 + $ 56,000+ $ 203,000 =$ 336,000

ekkarill92 answered 2 years ago

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