Question

Angel Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: Activity Cost Pools (and Activity Measures) Estimated Overhead Cost Machine related (machine-hours) $ 311,240 Batch setup (setups) $ 343,980 Order size (direct labor-hours) $ 242,820 Expected Activity Activity Cost Pools Product X Product Y Total Machine related 5,200 7,200 12,400 Batch setup 10,400 2,200 12,600 Order size 4,200 7,200 11,400 Assuming that actual activity turns out to be the same as expected activity, the total amount of overhead cost allocated to Product X would be closest to:

Answer 1

Answer:

Machine related= $130,520

Batch setup= $283,920

Order size= $89,460

Explanation:

First, we need to calculate the predetermined overhead rate for each activity:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Machine related= 311,240/12,400= $25.1 per machine hour

Batch setup= 343,980/12,600= $27.3 per setup

Order size= 242,820/11,400= $21.3 per direct labor hour

Now, we can allocate costs to Product X:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Machine related= 25.1*5,200= $130,520

Batch setup= 27.3*10,400= $283,920

Order size= 21.3*4,200= $89,460