Sabroso Chocoloate Company has two activities. The cost of setting up equipment

Question

Sabroso Chocoloate Company has two activities. The cost of setting up equipment is driven by setup hours; baking costs are driven by oven hours.

The company produces two products: Fudge and Cookies, which have the following information.

Ignoring Activity-Based Costing and using the plantwide rate, which is based on oven hours, what is the total overhead assigned to Fudge?

Fudge    Cookies Activity Rates Direct Materials & Direct Labor    $453,719 $506,263 Units Produced 7,345 20,206 Setup hours 3,153 716 $ 54 Oven hours 1,288 5,879 $ 14,636 Plantwide Activity Rate $ 155

Explanation / Answer

Total Overhead Assigned to Fudge = Plantwide Rate * Oven Hours

= $ 155 * 1,288 Hours

= $ 199,640

Hence the correct answer is $ 199,640

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