Question

XYZ Corporation manufactures two models of office chairs, a standard and a deluxe model. The overhead costs for setups and components pools are $60,000 and $58,900, respectively. The following activity has been compiled: Number of Number of Number of Setups Components Direct Labor Hours Standard 11 6 295 Deluxe 29 13 205 Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the deluxe model

Answer 1

Answer:

$83,800

Explanation:

Setup cost assigned to Deluxe model = Setup Overhead costs * Number of setups required for Deluxe model/Total Number of setups required

Setup cost assigned to Deluxe model = $60,000 * 29/40

Setup cost assigned to Deluxe model = $43,500

Setup cost assigned to Deluxe model = Component Overhead costs x Number of components required for Deluxe model/Total Number of components required

Setup cost assigned to Deluxe model = $58,900 * 13/19

Setup cost assigned to Deluxe model = $40,300

Total amount of overhead costs assigned to the deluxe​ model = Setup cost assigned to Deluxe model + Setup cost assigned to Deluxe model = $43,500 + $40,300 = $83,800.