Racquet King Corporation manufactures titanium and aluminum tennis racquets. Rac

Question

Racquet King Corporation manufactures titanium and aluminum tennis racquets. Racquet King’s total overhead costs consist of assembly costs and inspection costs. The following information is available:

                 Cost                   Titanium                      Aluminum          Total Cost

            Assembly          500 mach. hours            500 mach. hours            $30,000

           Inspections                   350                                 150                      $50,000

                                     2,100 labor hours           1,900 labor hours

Racquet King is considering switching from one overhead rate based on labor hours to activity-based costing.

Using activity-based costing, how much assembly cost is assigned to titanium racquets?

a.   $21,000.

b.   $10,500.

c.   $15,750

d.   $15,000.

Explanation / Answer

Assembly cost allocation = 30000/1000 = 30 per machine hour

Assembly cost allocated to Titanium = 500*30 = 15000

so answer is d) $15,000

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