Nguyen Company makes products C and D. Information for overhead costs and for th
ID: 2500282 • Letter: N
Question
Nguyen Company makes products C and D. Information for overhead costs and for the two products appears below. The company makes 100,000 units of product C each year and 20,000 units of product D.
Activity
Driver
Total Overhead Cost
Product C Usage
Product D usage
$200,000
500 setups
1,500 setups
$300,000
60,000 parts
40,000 parts
$600,000
12,000 machine hrs
6,000 machine hours
$400,000
10,000 inspections
40,000 inspections
$300,000
10,000 shipments
10,000 shipments
$1,800,000
What will the total overhead cost of product C be if all overhead is assigned using ABC and each activity above is treated as a separate pool?
$8.60 per unit
$18.00 per unit
$15.00 per unit
$47.00 per unit
Activity
Driver
Total Overhead Cost
Product C Usage
Product D usage
Set up # of setups$200,000
500 setups
1,500 setups
Ordering parts # of parts$300,000
60,000 parts
40,000 parts
Machining machine hours$600,000
12,000 machine hrs
6,000 machine hours
Inspection # of inspections$400,000
10,000 inspections
40,000 inspections
Shipping # of shipments$300,000
10,000 shipments
10,000 shipments
Total overhead$1,800,000
Explanation / Answer
Overhead cost per unit for product C = $860000 / 100000 = $8.60 per unit
Activity Driver Total Overhead Cost ($) Product C Usage Product D usage Total of activites unit activity cost($) Set up # of setups 200000 500 setups 1,500 setups 2000 set ups 100 per set up Ordering parts # of parts 300000 60,000 parts 40,000 parts 100000 parts 3 per parts Machining machine hours 600000 12000 machine hours 6,000 machine hours 18000 machine hours 33.3333 per machine hour Inspection # of inspections 400000 10,000 inspections 40,000 inspections 50000 inspections 8 per inspection Shipping # of shipments 300000 10,000 shipments 10,000 shipments 20000 shipments 15 per shipments Total overhead 1800000Related Questions
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