Asked by PETER MATOKE on Jun 25, 2024
Verified
Activity rates from Mcelderry Corporation's activity-based costing system are listed below.The company uses the activity rates to assign overhead costs to products: 
Last year, Product Q06J involved 10 customer orders, 580 assembly hours, and 12 batches.How much overhead cost would be assigned to Product Q06J using the activity-based costing system?
A) $71.01
B) $219.12
C) $2,388.22
D) $42,748.02
Activity Rates
Predetermined rates used in activity-based costing to allocate costs to products or services based on specific activities undertaken.
- Calculate rates relating to overhead and utilize these figures to compute product costs as per Activity-Based Costing.
- Comprehend the allocation techniques of overhead costs through various activity drivers.
Verified Answer
SK
Sudhakar KanagalaJun 30, 2024
Final Answer :
C
Explanation :
We need to use the activity rates given in the table to calculate the overhead costs assigned to Product Q06J:
Customer orders:
Activity rate = $120,000 ÷ 2,400 orders = $50/order
Overhead cost assigned to Product Q06J based on customer orders = 10 orders × $50/order = $500
Assembly hours:
Activity rate = $306,000 ÷ 9,000 hours = $34/hour
Overhead cost assigned to Product Q06J based on assembly hours = 580 hours × $34/hour = $19,720
Batch setups:
Activity rate = $230,000 ÷ 460 batches = $500/batch
Overhead cost assigned to Product Q06J based on batch setups = 12 batches × $500/batch = $6,000
Total overhead cost assigned to Product Q06J = $500 + $19,720 + $6,000 = $26,220
Therefore, the correct answer is C) $2,388.22 (rounded to the nearest cent).
Customer orders:
Activity rate = $120,000 ÷ 2,400 orders = $50/order
Overhead cost assigned to Product Q06J based on customer orders = 10 orders × $50/order = $500
Assembly hours:
Activity rate = $306,000 ÷ 9,000 hours = $34/hour
Overhead cost assigned to Product Q06J based on assembly hours = 580 hours × $34/hour = $19,720
Batch setups:
Activity rate = $230,000 ÷ 460 batches = $500/batch
Overhead cost assigned to Product Q06J based on batch setups = 12 batches × $500/batch = $6,000
Total overhead cost assigned to Product Q06J = $500 + $19,720 + $6,000 = $26,220
Therefore, the correct answer is C) $2,388.22 (rounded to the nearest cent).
Explanation :
The overhead cost charged to Product Q06J is: 
Learning Objectives
- Calculate rates relating to overhead and utilize these figures to compute product costs as per Activity-Based Costing.
- Comprehend the allocation techniques of overhead costs through various activity drivers.