Answer:
Option (b) is correct.
Explanation:
Setting up machine cost applied to product case 165:
= (Total setting up machine cost ÷ Total machine setups) × Number of machine setups of case 165
= [$2,400,000 ÷ (600 + 400)] × 400
= $2,400 × 400
= $960,000
Machining cost applied to product case 165:
= (Total machining cost ÷ Total machine hours) × Number of machine hours of case 165
= [$5,400,000 ÷ (24,000 + 26,000)] × 26,000
= $108 per machine hour × 26,000
= $2,808,000
Inspecting cost applied to product case 165:
= (Total Inspecting cost ÷ Total Inspections) × Number of Inspections of case 165
= [$1,800,000 ÷ (800 + 700)] × 700
= $1,200 per inspection × 700
= $840,000
Therefore,
Overhead applied to Case 165:
= Setting up machine cost + Machining cost + Inspecting cost
= $960,000 + $2,808,000 + $840,000
= $4,608,000
