Umanzor Corporation uses activity-based costing to assign overhead costs to prod

Question

Umanzor 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: Processing, $51,000; Supervising, $31,600; and Other, $20,300. Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

16,240            

1,230            

What is the overhead cost assigned to Product S5 under activity-based costing? (Round your intermediate calculations to 2 decimal places.)

MHs (Processing) Batches (supervising)   Product S5 15,600             810               Product F5 640             420               Total

16,240            

1,230            

Explanation / Answer

Hi,

Please find the answer as follows:

Overhead Cost Allocated to Product S5

Processing Cost Allocated to Product S5 = Total Processing Costs*Machine Hours for S5/Total Machine Hours = 51000*15600/16240 = 48984

+

Supervising Cost Allocated to Product S5 = Total Supervising Costs*Batches for S5/Total Batches = 31600*810/1230 = 20808.90

Total Cost Allocated = 48984 + 20808.90 = 69792.90

Option B (69792.90) is the correct answer.

Notes:

1) Other costs will not get allocated to any of the products as these are general costs and not based on the level of activity.

Thanks.

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