X Company uses an activity-based costing overhead allocation system. It has iden

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)?

Activity Budgeted Cost   Material Handling $111,000       Purchasing 58,000       Machine Maintenance 55,000      

Explanation / Answer

Allocated to product A:

Material handling: 111,000*(27,100/(912300)) = 3297.27

purchasing: 58,000*(45900/(959300)) = 2775.15

packaging: 55,000*(71500/(834200)) = 4714.10

total: 3297.27 + 2775.15 + 4714.10 = 10786.52

answer: $10786.52

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