Question

# A company uses activity-based costing to determine the costs of its three products: A, B, and...

A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table:

 Budgeted Activity Activity Cost Pool Budgeted Cost Product A Product B Product C Activity 1 \$ 75,000 6,500 9,500 20,500 Activity 2 \$ 50,000 7,500 15,500 8,500 Activity 3 \$ 92,000 3,000 1,500 2,125

How much overhead will be assigned to Product B using activity-based costing?

Multiple Choice

• \$64,953.91

• \$85,124.79

• \$66,263.55

• \$217,000.00

• \$75,000.00

K Company estimates that overhead costs for the next year will be \$3,300,000 for indirect labor and \$840,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 80,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?

Multiple Choice

• \$0.02 per direct labor hour.

• \$51.75 per direct labor hour.

• \$41.25 per direct labor hour.

• \$10.50 per direct labor hour.

• \$0.10 per direct labor hour.

#### Homework Answers

Answer #1

1.

 Activity Total Cost pool Total Budgeted Activity Product B Activity Product B Overhead Assigned Activity 1 75,000.00 36,500.00 2.05 9,500.00 19,520.55 Activity 2 50,000.00 31,500.00 1.59 15,500.00 24,603.17 Activity 3 92,000.00 6,625.00 13.89 1,500.00 20,830.19 Product B Overhead Assigned 64,953.91

2.

Company's plantwide overhead rate = (3,300,000 + 840,000)/80,000

=51.75 Per Direct Labor Hour

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