Question

g Handal Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Machining, Order Filling, and Other. The costs in those activity cost pools appear below: Machining $ 11,325 Order Filling $ 26,274 Other $ 7,200 Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: MHs (Machining) Orders (Order Filling) Product O4 3,600 270 Product S1 11,500 1,240 Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. Product O4 Product S1 Sales (total) $ 98,100 $ 104,600 Direct materials (total) $ 45,800 $ 35,000 Direct labor (total) $ 37,600 $ 38,700 What is the overhead cost assigned to Product S1 under activity-based costing

Answer 1

Answer:

Overhead Cost - S1 =  $30201

Explanation:

To assign Overhead costs to S1, we first need to calculate the Overhead Absorption rate for Machining and Order filling.

The Overhead Absorption rate for Machining is calculated by dividing the Machining Overheads by the number of Machine hours to calculate $ Overhead per Machine Hour.

• Total Machining Hours = 11500 + 3600 = 15100

• Machining = $11325 / 15100 Hours = $0.75 / Machine Hour

Now we do the same calculation for Order Filling Overheads and divide them by Number of Orders.

• Total Number of Orders = 270 + 1240 = 1510

• Order Filling = 26274 / 1510 = $17.4 per order

Now we allocate the Overheads to S1 on the basis of Machine Hours and Number of orders relating to S1.

• S1 Machine Hours = 11500

• S1 Orders = 1240

• S1 Overheads = 0.75 × 11500 + 17.4 × 1240 = $30201