Question

Chinchilla, Inc. uses activity-based costing. The company produces X and Y. Information relating to the two products is as follows: X Y Units produced 38,000 50,000 Machine-hours 15,000 17,000 Direct labor-hours 16,000 24,000 Materials handling (number of moves) 8,000 12,000 Setups 10,000 14,000 The following costs are reported: Materials handling $320,000 Labor-related overhead 560,000 Setups 480,000 Labor-related overhead costs assigned to product X are: Select one: A. $224,000 B. $576,000 C. $464,000 D. $384,000

Answer 1

Answer:

Labor related overhead of X = $224,000

Explanation:

Given that

Direct labor hours of X = $16,000

Direct labor hours of Y = $24,000

Labor-related overhead = $560,000

The calculation of given question is below:-

Direct labor hours of X and Y = $16,000 + $24,000

= 40,000

So, the activity cost of Direct labor hours

= $560,000 ÷ $40,000

= 14

Labor related overhead of X

= $16,000 × 14

= $224,000