Question

A firm produces two products, X and Y and uses activity based costing to allocate overhead...

A firm produces two products, X and Y and uses activity based costing to allocate overhead costs. The various activities undertaken by the firm and the overhead cost pools and cost drivers are summarised below.

Overhead activity Overhead cost Cost driver Cost driver consumption
X Y
Machining $125,000 Machine hours 25 75
Setups $ 80,000 Number of setups 24 36
Engineering $120,000 Engineering hours 120 80

If the firm uses the above cost drivers to allocate the overhead of each activity, then what amount of overhead will be allocated to products X, and Y respectively?

Select one:

a. $7805.55; $5388.88

b. $135,250; $189,750

c. $152,569.44; $207,430.55

d. $157,144; $167,856

e. $207,430.55; $152,569.44

Business   Accounting   
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Answer #1
Correct Option B
X Y
Total Overhead          135,250          189,750
Note 1: Overhead allocation sheet
X Y
Activity Total OH Cost Total Cost Driver OH Rate Driver Incurred OH Cost assigned Driver Incurred OH Cost assigned
Mahcining 125000 100 1250.00 25 31250 75 93750
Setups 80000 60 1333.33 24 32000 36 48000
Engineering 120000 200 600.00 120 72000 80 48000
Total 325000 135250 189750
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