Question

Donna Crawford Co. has identified an activity cost pool to which it has allocated estimated overhead of $1,920,000. It has determined the expected use of cost drivers for that activity to be 160,000 inspections. Widgets require 40,000 inspections, gadgets 30,000 inspections, and targets 90,000 inspections. The overhead assigned to each product is:_________

Answer 1

Answer:

$480,000; $360,000; $1,080,000

Explanation:

Given that,

Allocated estimated overhead = $1,920,000

Expected use of cost drivers = 160,000 inspections

Widgets require = 40,000 inspections

Gadgets require = 30,000 inspections

Targets requires = 90,000 inspections

Overhead rate per activity:

= Total overhead ÷ Expected use of cost drivers

= $1,920,000 ÷ 160,000

= $12

Overhead assigned to Widgets:

= Overhead rate per activity × No. of inspections widgets require

= $12 × 40,000

= $480,000

Overhead assigned to Gadgets:

= Overhead rate per activity × No. of inspections gadgets require

= $12 × 30,000

= $360,000

Overhead assigned to Targets:

= Overhead rate per activity × No. of inspections targets require

= $12 × 90,000

= $1,080,000