Question

15. A company uses activity-based gosting to determine the cost of its three products: est and activity for each of the company's three activity cost pools are shown in the following aine the costs of its three products: A, B and C. Activity Cost Pool Budgeted Activity Hudgeted Activity Product B Cost Activy Machine how MD) Activity 2 - Square Activity $70,000 Product A .00 MH 7,000 Total Activity Product C 20.000 MHET Rate 9.000 MHET Activity. She 5450 DO MH 582,000 2,300 setups 15.000 1.000 setups 30.000 1.625 setups S125 setups 16. What is the activity rate for setup costs? a $1.5 per setup b. $2.00 per setup c. $16 per setup d. $19.50 per setup 17. How much total overhead will be assigned to Product B using activity-based costing? A. $56,500 B. $78,000 C. $62,500 D. S197,000

Answer 1

Solution Question 14 & 15 Activity rate is calculated by dividing the total activity cost by the total activity Budgeted Activity Total Activity Rate Activity Cost Pool Activity Cost Drivers Activity Cost (B) No. of Machine hours (A) (C) $70,000 (D) (E=C/D) $2.00 Activity 1-Machine hours (MH) Activity 2-Square feet Activity 3-Setups 35,000 Square feet No. of Setups $45,000 $1.50 30,000 $82,000 $16.00 5,125 Question 16 Activity rate for setup costs c. $16 per setup (Refer Question 14 & 15 for calculation) Question 17: Assigning of overheads to Product B using activity-based costing Overhead Activity Activity Activity Cost Pool Activity Cost Drivers cost Rate used assigned (E=Cx D) $18,000 $22,500 $16,000 $56,500 (B) No. of Machine hours Square feet No. of Setups (A) (C) $2.00 (D) Activity 1-Machine hours (MH) Activity 2-Square feet Activity 3-Setups 9,000 $1.50 15,000 1,000 $16.00 Totals Total overhead cost assigned to Product B A. $56,500