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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