Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.

Question

Business

Midge

16 May, 11:14

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.

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Tessie · Answer 1

Model XLT = $73,160

Model TXT = $44,840

Explanation:

first we must determine the rate per design hour:

rate per design hour = $118,000 / 1,000 design hours = $118 per design hour

Model XLT = 620 design hours x $118 = $73,160

Model TXT = 380 design hours x $118 = $44,840

total $118,000