X Company uses an activity-based costing overhead allocation system. It has iden
ID: 2507983 • Letter: X
Question
X Company uses an activity-based costing overhead allocation system. It has identified three activities - Material Handling, Purchasing, Machine Maintenance - and their respective cost drivers - pounds of material, purchase orders, machine hours. Budgeted activity costs are as follows:
The following cost driver information is available for its products:
How much overhead was allocated to Product A (round overhead rates to the nearest cent)?
Explanation / Answer
material handling to product A = (27100/912300)*111000 (cost driver is pounds of material)
= 3297.27
Purchasing to product A = (45900/959300)*58000 (cost driver is purchase orders)
= 2775.15
Material maintainence to product A = (71500/834200)*55000 (cost driver is machine hours)
= 4714.08
Total budgeted cost for A = 3297.27 + 2775.15 + 4714.08 = 10786.50 dollars
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