Question

In: Accounting

cost pools as follows: Machining                     $20,800 Order Filling             &

cost pools as follows:

  • Machining                     $20,800
  • Order Filling                  $30,400
  • Other                            $48,800

Machining costs are allocated to products using machine hours (mh) and Order Filling costs are assigned to products using the number of orders (o). The costs of the Other activity pool are not assigned to products. Activity data appears below.

Machining (mh)

Order Filling (o)

Product D7

6,600

800

Product U1

13,400

200

What is the total overhead cost assigned to Product D7 under activity-based costing?

Solutions

Expert Solution

Answer)

Calculation of overhead cost assigned to Product D7

Cost Pools

Activity

Activity Consumed

Activity Rate

Overhead cost assigned (Activity Consumed X Activity rate)

Machining

Number of machine hours

                                           6,600

                      $ 1.04

                  $ 6,864

Order Filling

Number of orders

                                               800

                   $ 30.40

                 $ 24,320

Total

                 $ 31,184

Therefore overhead cost assigned to Product D7 is $ 31,184.

Working note:

Calculation of Activity rate:

Cost Pools

Overhead Cost

Activity consumed

Cost per Activity (Overhead cost/ Total Activity

Activity

Product D 7

Product U 1

Total Activity

Machining

$20,800

Number of machine hours

                   6,600

                 13,400

                          20,000

                                                 $ 1.04

Order Filling

$30,400

Number of orders

                       800

                       200

                            1,000

                                               $ 30.40


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