Berg Company incurs $240,000 overhead costs each year in its three main departme

Question

Berg Company incurs $240,000 overhead costs each year in its three main departments, setup ($15,000), machining ($165,000), and packing ($60,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Berg's two products is as follows: Product A1 Product B1 Number of setups 20 20 Machining hours 1,000 4,000 Orders packed 150 350 Number of products manufactured 600 400 Using ABC, how much overhead is assigned to Product B1 each year?

Explanation / Answer

Activity-based Overhead Rates: Setups: 15000 / 40 * 20 = 7500 Machine hour: 165000 / 5000 * 4000 = 132000 Orders packed: 60000 / 500 * 350 = 42000 Costs applied to B1 = 7500 + 132000 + 42000 = 181500

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