X Company makes two products, A and B, and uses an
activity-based costing overhead allocation system, with three cost
pools and three cost drivers. Budgeted costs and driver information
for 2020 were as follows:
Cost Pool 1 | Cost Pool 2 | Cost Pool 3 | |
Budgeted costs | $109,000 | $54,000 | $29,000 |
Cost Drivers | |||
Product A | 83,200 | 57,000 | 69,700 |
Product B | 77,000 | 50,200 | 50,400 |
What will the allocation to Product B be? [round overhead rate(s)
to two decimal places].
Ans:
Overhead rate = cost / cost drivers
1 = 109000/(83200+77000) = $0.68
2 = 54000 /(57000+50200) = $0.50
3 = 29000 /(69700+50400) = $0.24
Allocation to product B = 77000*0.68 +50200*0.50 + 50400*0.24
= $89556
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