Question

Angara Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: Activities (and Activity Measures) Estimated Overhead Cost Machine related (machine-hours) $268,400 Batch setup (setups) $279,300 General factory (direct labour-hours) $192,000 Expected Activity Activities Product X Product Y Total Machine related 4,500 6,500 11,000 Batch setup 9,000 1,500 10,500 General factory 3,500 6,500 10,000 Assuming that actual activity turns out to be the same as expected activity, the total amount of overhead cost allocated to Product X would be closest to: $279,300 $355,700 $416,400 $635,000

Answer 1

Total amount of overhead cost allocated to Product X = $416,400

Working notes for the above answer is as under

cost per machine related hour.

=Machine realted cost / Number of machine Hour

=268400/11,000

=$24.40

cost per set up.

=batch related cost / Number of set up

=279300/10500

=$26.6

Cost per direct labor

=General factory cost/Machine Hour

=192000/10,000

=$19.2

	Rate	No of activity	Total Cost
	A	B	C=A*B
Machine related	24.4	4500 hour	109800
batch related	26.6	9000 set up	239400
General factory cost	19.2	3500	67200
			416400

the total amount of overhead cost allocated to Product X = $416,400