Question

Kozlov Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool	Total Cost				Total Activity
Assembly	$	942,480			66,000	machine hours
Processing orders	$	85,050			1,800	orders
Inspection	$	126,854			1,820	inspection hours

The company makes 430 units of product A21W a year, requiring a total of 690 machine-hours, 40 orders, and 10 inspection-hours per year. The product’s direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit. According to the activity-based costing system, the total overhead cost of producing 430 units of A21W is:

Multiple Choice

• $11,121.40

• $13,338.20

• $32,370.00

• $12,440.20

• $12,215.70

Answer 1

Calculation of Activity rates

Assembly = $12.48 per Machine hour [$942,480 / 66,000 MH]

Processing orders = $47.25 per Order [$85,050 / 1,800 Orders]

Inspection = $69.70 per Inspection hours [$126,854 / 1,820 inspection hours]

The total overhead cost of producing 430 units of A21W

Total Overhead Costs = [690 MH x $14.28 per machine hours] + [40 Orders x $47.25 per Order] + [10 Hours x $69.70 per hour]

= $9,853.20 + $1,890.00 + $697.00

= $12,440.20

“Hence, the total overhead cost of producing 430 units of A21W will be $12,440.20“