Question

Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:

Activity Cost Pool	Activity Measure	Expected Overhead Cost		Expected Activity
Labor-related	Direct labor-hours	$	25,600	1,600	DLHs
Purchase orders	Number of orders	$	3,090	515	orders
Product testing	Number of tests	$	6,030	335	tests
Template etching	Number of templates	$	1,430	55	templates
General factory	Machine-hours	$	68,400	7,600	MHs

2. The expected activity for the year was distributed among the company’s four products as follows:

	Expected Activity
Activity Cost Pool	Product A	Product B	Product C	Product D
Labor-related (DLHs)	675	125	400	400
Purchase orders (orders)	30	215	140	130
Product testing (tests)	200	60	0	75
Template etching (templates)	0	37	15	3
General factory (MHs)	2,700	2,000	1,600	1,300

Using the ABC data, determine the total amount of overhead cost assigned to each product.

Answer 1

activity cost pool	expected cost	expected activity	activity rate
labour related	25,600	1,600	16
purchase order	3,090	515	6
product testing	6,030	335	18
template etching	1,430	55	26
general factory	68,400	7,600	9

activity cost pool	Product A	Product B	Product C	Product D
labour related	10,800	2,000	6,400	6,400
purchase order	180	1,290	840	780
product testing	3,600	1,080	-	1,350
template etching	-	962	390	78.00
general factory	24,300	18,000	14,400	11,700
total overhead allocated	38,880	23,332	22,030	20,308