Question

A company has two products: Cakes and Cookies. It uses activity- based costing and has prepared the following analysis showing budgeted costs and activities. Use this information to compute (a) the company's overhead rates for each of the three activities and (b) the amount of overhead allocated to Cakes. Activity Cost Budgeted Overhead Cost Product: Cakes Product: Cookies Total Pool 700 800 1,500 Activity 1 Activity 2 Activity 3 $60,000 $75,000 $90,000 1,500 1,500 3,000 1,700 800 900 Total Budgeted overhead $225,000 ***round to the whole dollar and use in your final calculation.*** Overhead rate for Activity 1 is $ Overhead rate for Activity 2 is $ Overhead rate for Activity 3 is $ Total overhead allocated to Cakes based on activity-based costing is

Answer 1

1.)	Overhead rate for activity 1	$ 40	=60000/1500
	( Budgeted overhead cost / Total activity pool )
2.)	Overhead rate for activity 2	$ 25	=75000/3000
	( Budgeted overhead cost / Total activity pool )
3.)	Overhead rate for activity 3	$ 53	=90000/1700
	( Budgeted overhead cost / Total activity pool )
4.)		Amount $
	Allocated overhead of Activity 1	28,000	=40*700
	Allocated overhead of Activity 2	37,500	=25*1500
	Allocated overhead of Activity 3	42,400	=800*53
	Total overhead allocated to Cakes	107,900