X Company makes two products, A and B, and uses an
activity-based costing overhead allocation system, with three cost
pools and three cost drivers. Budgeted costs and driver information
for 2020 were as follows:
Cost Pool 1 | Cost Pool 2 | Cost Pool 3 | |
Budgeted costs | $104,000 | $57,000 | $24,000 |
Cost Drivers | |||
Product A | 80,000 | 55,100 | 75,000 |
Product B | 76,100 | 48,800 | 48,100 |
What will the allocation to Product B be? [round overhead rate(s)
to two decimal places].
d
Cost Pool | Budgeted Cost | Cost Driver | Cost Drivers B | Total Cost Drivers | Activity Rate ( Budgeted cost / Total cost drivers | Cost allocated to Product B (Cost Drivers B x Activity Rate) |
1 | 104,000 | 80,000 | 76,100 | 156,100 | 104,000/156,100 = 0.67 | 76,100 x 0.67= 50,700.83 |
2 | 57,000 | 55,100 | 48,800 | 103,900 | 57,000/103,900 = 0.55 | 48,800 x 0.55 = 26,771.90 |
3 | 24,000 | 75,000 | 48,100 | 123,100 | 24,000/123,100 = 0.19 | 48,100 x 0.19 = 9,377.74 |
$86,850 |
Cost allocated to product B is $86,850.
Kindly comment if you need further assistance. Thanks‼!
Note: Exact answer may slightly differ due to rounding off
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