Archie Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products.

Setting up batches $ 78.76 per batch

Processing customer orders $ 59.40 per customer order

Assembling products $ 1.58 per assembly hour

Last year, Product X26X required 34 batches, 1 customer order, and 369 assembly hours.

Required: How much overhead cost would be assigned to Product X26X using the company's activity-based costing system

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2 August, 18:50

Archie Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products.

Setting up batches $ 78.76 per batch

Processing customer orders $ 59.40 per customer order

Assembling products $ 1.58 per assembly hour

Last year, Product X26X required 34 batches, 1 customer order, and 369 assembly hours.

Required: How much overhead cost would be assigned to Product X26X using the company's activity-based costing system

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Answers (1)

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Mitzy · Answer 1

In the activity based costing system, the costs are always allocated to unit product on a more fairer basis which is allocating cost pools on the cost driver basis and always remember that these cost pools originated by breaking the total overhead costs. This total Overhead cost is used only in absorption costing and absorbed on not a fairer basis (only uses only one basis of allocation which is either machine hours or labor hours).

Explanation:

The cost driver for setting up batches is number of batches, processing customer orders is customer order and that of Assembling products is assembly hours.

So

Setting up batches cost per Product X26X = $78.6 * 34 = $2672.4

Processing Customer Orders per Product X26X = $59.4 * 1 = $59.4

Assembling products cost per Product X26X = $1.58 * 369 = $583.2

Total overhead cost assigned to unit product = $3315