Question

QUESTION 21 ABC Inc, makes two products, A and B. The company is currently assigning the $1,200,000 of overhead costs to its products based on machine hours of the overhead, $480,000 is utilities related and the remainder is related to labor hours. The following information is also available: Product A Product B Number produced 250,000 750,000 Machine hours 60,000 30,000 50.000 25,000 Direct labor hours a. Determine the total overhead cost assigned to standard items and custom items using the current system b. Determine the total overhead cost assigned to standard items and custom items if more appropriate cost drivers were used. TT TT Paragraph Arial 3 (12pt) E-ET- * DOO TT. IH Click Save and Submit to save and submit. Click Save All Answers to save all answers. 7 o

Answer 1

a]	Predetermined overhead rate = 1200000/(60000+30000)	$                13.33	Per MH
		Product A	Product B	Total
	Overhead assigned	$           799,800	$          399,900	$     1,199,700
		[60000*13.33]	[30000*13.33]
		Difference in total due to rounding off
		of predetermined overhead rate
b]	Predetermined OH rate for utilities related costs = 480000/90000 =	$                  5.33	Per MH
	Predetermined OH rate for labor related costs = 720000/75000 =	$                  9.60	Per DLH
		Product A	Product B	Total
	Overhead assigned:
	Utilities related costs	$           319,800	$          159,900	$         479,700
		[60000*5.33]	[30000*5.33]
	Labor related costs	$           240,000	$          480,000	$         720,000
		[9.6*25000]	[9.6*50000]
		$           559,800	$          639,900	$     1,199,700
		Difference in total due to rounding off
		of predetermined overhead rate