Question

X Company makes two products, A and B, and uses an activity-based costing overhead allocation system, with three cost pools and three cost drivers. Budgeted costs and driver information for 2017 were as follows:

	Cost Pool 1	Cost Pool 2	Cost Pool 3
Budgeted costs	$113,000	$58,000	$26,000
Cost Drivers
Product A	78,000	62,000	73,000
Product B	67,000	54,000	55,000

What was the allocation to Product B in 2017?

Answer 1

Answer:

	Budgeted Activity
Activity Cost Pool	Product A	Product B	Total Activity
	A	B	C=A+B
Cost pool 1	78,000	67,000	145,000
Cost pool 2	62,000	54,000	116,000
Cost pool 3	73,000	55,000	128,000

	Total Cost	Total Activity	Rate
	A	B	C=A/B
Cost pool 1	113000	145,000	0.78
Cost pool 2	58000	116,000	0.50
Cost pool 3	26000	128,000	0.20

		Expected	Total
	Rate	Uses of cost driver	Activity
		B	C=A*B
Cost pool 1	0.78	67000	52213.8
Cost pool 2	0.50	54000	27000.0
Cost pool 3	0.20	55000	11171.9
Allocation to Product B			90385.7

Allocation to Product B

90385.7