Question

Allure company manufactures and distributes two products M and XY. Overhead cost are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based (ABC) system.
She has collected the following information.

Activity Cost Driver    Amount    M XY

Production Setup    No. of setups $90,000 6    14

Material & handling No. of parts $48,000 56 24

Packaging cost No. of units 333,750    111,000    74,000

What is the total overhead allocated to product M?

Multiple coice,

$333.750

$260,850

$210.900

$283.050

Answer 1

Answer
The correct option is B : $ 260,850
Explanation
Activity	Cost Driver	Amount	M	XY	Total
Production Setup	No of setups	$ 90,000	$           6	$            14	$         20
Material handling	No of parts	$ 48,000	$         56	$            24	$         80
Packaging costs	No of Units	$333,750	$111,000	$     74,000	$185,000
		$471,750
Activity	Allocation to Product M
Production Setup	90000/20*6	$ 27,000
Material handling	48000/80*56	$ 33,600
Packaging costs	333750/185000*74000	$200,250
	Total Overhead	$260,850

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