Question

Activities Material handling measured by batches Mixing measured by batches Packaging measured by units Maintenance measured by # of setups Estimated Overhead Costs $259,000 $113,000 $84,000 $15,000 Estimated Activity 2,800 batches 2,260 batches 2,100,000 units 260 setups O A. $1,036.20 overcosted B. $50.01 overcosted O c. $57.69 undercosted Click to select your answer.

Answer 1

Total Estimated Manufacturing Overhead Cost	$                              471,000
Total Estimated Machine hrs	100000	hours
Plantwide manufacturing overhead rate	$                                    4.71	per machine hrs
Manufacturing overhead Cost allocated =$4.71*220 hrs =$1,036.20
Computation of Activity Rate
Activities	Costs	Activity Base	Cost driver total	Overhead rate(Costs/Cost driver total)
Materials Handling	$259,000	Number of batches	2,800	$92.50	per batch
Mixing	$113,000	Number of batches	2,260	$50.00	per mixing batch
Packaging	$84,000	Number of units	2,100,000	$0.04	per unit
Maintainance	$15,000	Number of setups	260	$57.6923077	per setup
Total	$471,000
	ABC rate	Activity Based usage	Activity Based usage*ABC rate
Materials Handling	$                                  92.50	5	$                                       462.50
Mixing	$                                  50.00	5	$                                       250.00
Packaging	$                                    0.04	5400	$                                       216.00
Maintainance	$                                  57.69	1	$                                         57.69
Overhead Cost			$                                       986.19
So the Overhead Cost is overallocated by $50.01($1,036.20 - $986.19)
So Option B is answer