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16 February, 04:08

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

Data concerning two products appear below:

Activity cost pools Activity rate

Setting up batches $59.06 per batch processing

Customer orders $72.66 per customer order

Assembling products $3.75 per assembly hour

Required:

How much overhead cost would be assigned to Product K91B using the activity-based costing system?

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Answers (1)
  1. 16 February, 06:26
    0
    The overhead cost using ABC is $9,097.41

    Explanation:

    Activity Cost Pool of products is as:

    Setting up batches of ABC = Activity Rate * Total Activity

    where

    Activity Rate = $59.06 per batch

    Total activity = 84 batches

    So,

    Setting up batches = $59.06 * 84

    = $4,961.04

    Processing customer orders of ABC = Activity Rate * Total Activity

    where

    Activity Rate = $72.66 per order

    Total activity = 32 orders

    So,

    Processing customer orders = $72.66 * 32/

    = $2,325.12

    Assembling products of ABC = Activity Rate * Total Activity

    where

    Activity Rate = $3.75 per AH

    Total activity = 483 AHs

    So,

    Assembling products = $3.75 * 483

    = $1,811.25

    Therefore, the overhead cost would be computed as:

    Overhead cost = Assembling products of ABC + Processing customer orders of ABC + Setting up batches of ABC

    Overhead cost = $1,811.25 + $2,325.12 + $4,961.04

    Overhead cost = $9,097.41
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