Question

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?

Answer 1

Answer:

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