Question

Tableco will manufacture two types of tables in the coming year-square tables and round tables. Tableco is considering introducing an activity-based costing system. Below is each activity, its cost and related activity driver:

Activity	Cost $	Activity driver
Machine setups	500000	Number of setups
Materials handling	96000	Number of parts
Cutting	48000	Number of parts
Assembly	2100000	Direct labour hours
Finishing	350000	Number of units

The level of activity estimated for the year is:

	Square	Round
Units to be produced	25 000	10 000
Number of setups	100	25
Number of parts per unit	32	16
Direct labour hours per unit	4	2

Total overhead cost allocated to Square tables in respect to Material handling if activity costing would be:

Select one:

$25000

$2500

$80000

$32000

Answer 1

Option c) $ 80,000 is correct.

Please comment for any explanation,

Thanks,