Question

Duce, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows:
Product A Product X Total
Machine hours 1,900 3,900 5,800
Number of batches 45 22 67

What is the amount of Machining cost assigned to Product X?

a. $780,000
b. $22,500
c. $380,000
d. $950,000

Answer 1

Answer:

Machinning= $487,500

Explanation:

Giving the following information:

The activity rate for Machining is $125 per machine hour.

Product A Product X Total

Machine hours 1,900 3,900 5,800

To assign costs to Product X, we need to use the following formula:

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

Machinning= 125*3,900

Machinning= $487,500