Question

eBook Calculator Tri-bikes manufactures two different levels of bicycles: the Standard and the Extreme. The total overhead of $300,000 has traditionally been allocated by direct labor hours, with 130,000 hours for the Standard and 70,000 hours for the Extreme. After analyzing and assigning costs to two cost pools, it was determined that machine hours is estimated to have $200,000 of overhead, with 4,000 hours used on the Standard product and 1,000 hours used on the Extreme product. It was also estimated that the setup cost pool would have $100,000 of overhead, with 1,000 hours for the Standard and 1,500 hours for the Extreme. What is the overhead rate per product, under traditional and under ABC costing? Traditional ABC Overhead per Standard products Overhead per Extreme products Feedback Check My Work For traditional costing, use the estimated amounts for the total overhead (for both the Standard and Extreme). For ABC, use the amounts allocated to each bicycle type (amounts allocated to Standard and amounts allocated to Extreme). 10% 4 2 6:51 PM /19/2020

Answer 1

1) Traditional costing

	Standard product	Extreme product
Overhead	300000/200000*130000 = 195000	300000/200000*70000 = 105000

2) ABC Costing

	Standard product	Extreme product
Overhead assigned on machine hour	200000/5000*4000 = 160000	40000
Overhead assigned on setup	100000/2500*1000 = 40000	60000
Total	200000	100000

	Traditional	ABC
Overhead per standard product	195000	200000
Overhead per extreme product	105000	100000