Question

Caldwell Company manufactures two products, Product A and Product B. The company's overhead costs consist of setting up machines, $105,000; machining, $50,000; and inspecting, $77,000. Information on the two products is:

Answer 1

Answer:

$96,080

Explanation:

Calculation of Caldwell Company amount of overhead applied to Product A using activity-based costing.

First step is to use ABC, Overhead assigned to Product A :

Using this formula

[(Number of machine setups for Product A / 1,000) * Machine setup Overhead costs] + [(Number of machine hours for Product A / 30,000) * Machining Overhead costs] + [(Number of inspections for Product A / 1,500) * Inspecting Overhead costs]

Hence:

Let plug in the formula

= [(240 / 1,000) * $105,000] + [(22,200 / 30,000) * $50,000] + [(660 / 1,500) * $77,000]

= $25,200 + $37,000 + $33,880

= $96,080

Therefore Caldwell Company amount of overhead applied to Product A using activity-based costing will be:$96,080