X Company uses an activity-based costing overhead allocation system. It has identified three activities - Setup,...

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X Company uses an activity-based costing overhead allocation system. It has identified three activities - Setup,...

X Company uses an activity-based costing overhead allocation system. It has identified three activities - Setup, Purchasing, Packaging - and their respective cost drivers - setup hours, purchase orders, packages. Budgeted activity costs in 2018 were as follows:

Activity	Budgeted Cost
Setup	$104,200
Purchasing	55,400
Packaging	60,500

The following 2018 cost driver information is available for one of its products, Product X, and for all of its products (including Product X):

	Product X	All Products
setup hours	31,900	744,286
purchase orders	51,900	1,385,000
packages	66,600	864,286

How much overhead was allocated to Product X in 2018 [round overhead rate(s) to two decimal places]?

business accounting

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Answer 1

Answer #1

Overhead rate=Respective cost/Respective activity

Overhead rate for:

Setup=(104200/744286)=$0.14 per setup hour

Purchasing=(55400/1,385,000)=$0.04 per purchase order

Packaging=(60500/864,286)=$0.07 per package

Hence overhead allocated to Product X=(0.14*31900)+(0.04*51900)+(66,600*0.07)

=$11204.

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Answer 2

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