Question

SCS Co. uses activity-based costing in their manufacturing process. The company produces two products, ABC and XYZ. SCS has provided their costing department the following information from this year’s budget relating to the production of these two products:

	ABC	XYZ
Units to be produced	4,000	6,000
Machine-hours expected	100	200
Direct labor-hours expected	200	300
Materials handling (number of moves)	60	70
Machine setups (number of setups)	20	15

The following costs are expected to be incurred throughout the year, and are related to the cost drivers being measured:

Direct Labor Wages	$50,000
Materials handling	4,000
Labor-related overhead	42,000
Machine setups	7,000

What is the expected overhead allocated per unit of product ABC? NOTE: Round all per-unit costs to nearest cent.

a. $10.30

b. $30.77

c. $84.00

d. $200.00

e. None of the above

What is the total expected overhead allocated to product XYZ? NOTE: Round all per-unit costs to nearest cent.

a. $22,646.20

b. $27,353.90

c. $28,200.00

d. $30,353.90

e. None of the above

Answer 1

Overhead allocation is the allocation of indirect cost & expenses. As Direct labor wages is a direct cost. It is not included in the calculation of overhead allocated to both ABC & XYZ product.

1) e is the correct answer as overhead allocated per unit of ABC is $5.66 per unit

2) d is the correct answer- total overhead allocated to product XYZ is $30353.9

All the calculations are shown in the images attached. Kindly refer to them.