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	$	85,000			7,500			10,500			21,500
Activity 2	$	60,000			8,500			16,500			9,500
Activity 3	$	112,000			4,000			2,500			3,125

How much overhead will be assigned to Product B using activity-based costing?

Multiple Choice

• $257,000.00

• $99,151.20

• $85,000.00

• $75,241.11

• $80,381.50

Answer 1

E. $80,381.50

Activity 1: $85,000/(7,500 + 10,500 + 21,500) = $2.1519

Activity 2: $60,000/(8,500 + 16,500 + 9,500) = $1.7391

Activity 3: $112,000/(4,000 + 2,500 + 3,125) = $11.6364

Overhead assigned to Product B using activity-based costing = (10,500)( $2.1519) + (16,500)($1.7391) + (2,500)($11.6364) = $80,381.50