Question

A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table: Budgeted Activity Activity Cost Pool Budgeted Cost Product A Product B Product C Activity 1 $70,000 6,000 9,000 20,000 Activity 2 $45,000 7,000 15,000 8,000 Activity 3 $82,000 2,500 1,000 1,625 How much overhead will be assigned to Product B using activity-based costing? $197,000 O $56,500 $70,000 $78,000 $62,500

Answer 1

Allocation of overhead based on Using Activity based costing (ABC) costing

Activity Cost Pool	Budgeted Cost	Ratio	Product A	Product B	Product C
Activity 1	$             70,000	06:09:20	$       12,000	$       18,000	$       40,000
Activity 2	$             45,000	07:15:08	$       10,500	$       22,500	$       12,000
Activity 3	$             82,000	2.5:01:1.625	$         4,000	$       16,000	$       26,000
Overhead assigned to each product			$       26,500	$       56,500	$       78,000

Overhead will be assigned to Product B Using Activity based costing (ABC) costing is $56,500/-

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