Question

QUESTION 9

1. Fey Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled:

                                Number of               Number of                    Number of

   Product                       Setups            Components     Direct Labor Hours

   Standard                             22                                8                                375

   Deluxe                                 28                              12                                225

   Overhead costs          $40,000                    $80,000

   Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the standard model?

   		$49,600
   		$70,400
   		$75,000
   		$45,000

Answer 1

Answer:-

Total Amount of Overhead Costs to be assigned to Standard Model:

• Overhead Cost	$ 40,000
  Total No. of Setups [22+28]	50
  Number of setups for standard model	22
  Overhead Cost assigned to standard model [40000*22/50]	$ 17,600

• Overhead Cost	$ 80,000
  Total No. of Components	20
  Number of components for standard model	8
  Overhead Cost assigned to standard model [80000*8/20]	$ 32,000

  Hence, Total Overhead Cost to be assigned to Standard Model = 17600+32000 = $ 49,600

​​​​​​​Answer:- $49,600