Question

Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows:

Activity Cost Pools	Total Cost of Pool		Cost Driver	Estimated Cost Driver
Machining	$	380,120	Number of machine hours		88,400
Designing costs		86,400	Number of design hours		9,000
Setup costs		74,672	Number of batches		525

Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows:

	Product A	Product B	Product C
Number of machine hours	34,000	44,000	10,400
Number of design hours	3,600	2,000	3,400
Number of batches	60	180	285

Required:
Using activity rates, determine the amount of overhead assigned to each product. (Round activity rates to 2 decimal places. Round your other intermediate calculations and final answer to the nearest whole dollar amount.)

Answer 1

Calculate activity rate :

Activity cost pool	Total cost of pool	Cost driver	expected activity	activity rate
Machining	380120	No of machine hour	88400	4.3 per Mh
designing cost	86400	No of design hour	9000	9.6 per dh
setup cost	74672	no of batches	525	142.23 per batch

determine the amount of overhead assigned to each product.

	Product A	Product B	Product C
Machining	146200	189200	44720
Designing cost	34560	19200	32640
Setup cost	8534	25602	40536
Total overhead cost	189294	234002	117896