Question

t8

Weirick, Inc., manufactures and sells two products: Product T8 and Product P4. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product T8	Product P4	Total
Labor-related	DLHs	$	127,800	4,800	2,400	7,200
Production orders	orders		60,270	1,300	200	1,500
Order size	MHs		942,670	3,900	3,500	7,400
		$	1,130,740

The total overhead applied to Product P4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• $882,400

• $445,865

• $496,501

• $1,002,940

Answer 1

Answer: $496,501 -->Refer working note below

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Working note 1 - Allocation of Overhead to both the products using activity rates:
Activity Cost Pool	Activity Rate [Refer working note 2]		T8			P4
			Expected activity		Allocation (Activity Rate x Expected activity)	Expected activity		Allocation (Activity Rate x Expected activity)
Labor-related	$17.75	per DLH	4,800	DLHs	$85,200	2,400	DLHs	$42,600
Production orders	$40.18	per order	1,300	orders	$52,234	200	orders	$8,036
Order size	$127.39	per MH	3,900	MHs	$496,821	3,500	MHs	$445,865
Overhead assigned					$634,255			$496,501

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Working note 2 - Calculation of Activity rate
Activity Cost Pool	Estimated Overhead Cost (a)	Total expected activity (b)		Activity rate (a / b)
Labor-related	$127,800	7,200	DLHs	$17.75	per DLH
Production orders	$60,270	1,500	orders	$40.18	per order
Order size	$942,670	7,400	MHs	$127.39	per MH