Question

Summit Engineering manufactures two products, Product ACC01 and Product ACC02. The company has adopted an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

			Expected Activity
Activity Cost Pools	Activity Measures	Estimated Overhead Cost	Product ACC01	Product ACC02	Total
Labour-related	DLHs	$313,743	3,600	3,300	6,900
Purchase orders	Orders	70,264	300	500	800
General factory	MHs	253,555	4,300	4,200	8,500
		$637,562

The total overhead applied to Product ACC02 under activity-based costing is closest to:

	1) $319,252
	2) $125,286
	3) $304,920
	4) $273,240

Answer 1

Computation of ABC rate
Activity	OH Costs(Col 1)	No. of activity base(Col 2)	Activity Rate(Col 1 / Col 2)
Labor-related costs	$                313,743	6,900	$                                  45.47	per DLHs
Purchase orders	$                  70,264	800	$                                  87.83	per order
General Factory	$                253,555	8,500	$                                  29.83	per MHs
Total Overhead Cost	$                637,562
		Product ACC02
	ABC Rate	Activity Based usage	Activity Based usage*ABC rate
Labor-related costs	$                    45.47	3300	$                              150,051
Purchase orders	$                    87.83	500	$                                43,915
General Factory	$                    29.83	4200	$                              125,286
Total Overhead Cost allocated			$                              319,252
So Option A is answer