Question

Reynoso Corporation manufactures titanium and aluminum tennis racquets. Reynoso’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 $42000 Inspections 350 150 $82000 2100 labor hours 1900 labor hours Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing. Total overhead costs assigned to titanium racquets, using a single overhead rate, are

Answer 1

Reynoso Corporation

Determination of total overhead cost assigned to Titanium racquets using a single overhead rate;

Single plantwide overhead rate = total overhead cost/total direct labor hours

Total overhead cost = overhead cost at Assembly + overhead cost at Inspection

= $42,000 + $82,000 = $124,000

Total labor hours = 2,100 + 1,900 = 4,000 DLH

Single overhead rate = 124,000/4,000 = $31 per DLH

Total overhead cost assigned to Titanium racquets = $31 x 2,100 hours = $65,100

Hence, total overhead cost assigned to Titanium racquets using single overhead rate = $65,100