Question

Roti Boy Inc. makes 2 distinct products and uses an activity-based (ABC) costing system. Some of the cost information for the company is as follows:

	Product A	Product B
Total units produced	100,000	50,000
Number of units per batch	2, 000	5, 000

Batch-level Overhead Costs:

• Total batch level overhead cost: $60,000.
• Batch level overhead cost is made up entirely of machine set up costs
• The machine set up cost per batch is the same for both Product A and Product B
• Allocation base for batch-level overhead costs: number of batches produced

The value of batch-level overhead costs assigned to Product A is closest to:

Group of answer choices

40,000

60,000

17,143

50,000

33,333

Answer 1

Number of batches
			Product A	Product B	Total
Total units produced		100000	50000
Divide: Units produced per batch	2000	5000
Number of batch		50	10	60
Activity rate of Batch level cost:
Total Overheads cost	60000
Divide: Total Batches	60
Activity rate per batch	1000
Activity cost alocated to product A:
Number of batches run		1000
Multiply: Activity rate per batch		50
Activity cost alocated to product A:	50,000
Answer is $ 50,000