Question

Dercole Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $43,200; Order Filling, $13,900; and Other, $14,900. 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 N8 7,300 600
Product Y4 2,700 1,400
What is the overhead cost assigned to Product N8 under activity-based costing?

Answer 1

Answer:

$35,706

Explanation:

Machining:  

= Cost ÷ Total MHs

= $43,200 ÷ (7,300 + 2,700) MHs

= $43,200 ÷ 10,000 MHs

= $4.32 per MH

Order Filling:

= cost ÷ Total orders

= $13,900 ÷ (600 + 1,400) orders

= $13,900 ÷ 2,000 orders

= $6.95 per order

Overhead cost for Product N8:

= Machining + Order Filling

= ($4.32 per MH × 7,300 MHs) + ($6.95 per order × 600 orders)

= $31,536 + $4,170

= $35,706