Question

CR Co. has identified an activity cost pool to which it has allocated estimated overhead of $2,000,000. It has determined the estimated use of cost drivers for that activity to be 200,000 inspections. Product Widgets require 50,000 inspections, Product Gadgets 30,000 inspections, and Product Targets 20,000 inspections. The overhead assigned to each product is

Answer 1

Solution Statement showing computation of allocated overhead cost Particulars No of inspections (A) Allocated Amount ($2000,000/200,000) XA Product Widgets 50000 $ 500,000 Product Gadgets 30000 $ 300,000 Product Targets 20000 $ 200,000 Note Since the allocated overhead cost is determinable on 200,000 inspections, so to determine the allocable overhead on each product we have to allocate the per inspection cost to each product. Conclusion Hence the allocated overhead cost for Product widgets is $500,000 Hence the allocated overhead cost for Product Gadgets is $300,000 Hence the allocated overhead cost for Product Targets is $500,000