Asked by Nicholas Malmquist on Apr 24, 2024
Verified
Immen Corporation manufactures two products: Product B82O and Product P99Y. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products B82O and P99Y. 
Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product B82O?
A) $704,200
B) $301,800
C) $610,000
D) $503,000
Plantwide Overhead Rate
A single overhead allocation rate used throughout a manufacturing plant or entire facility, applied uniformly to all products or cost centers.
Activity-based Costing
A costing method that assigns overhead and indirect costs to related products and services based on the activities that generate costs.
- Inspect the impact that adopting an ABC system has on distributing manufacturing overhead costs across different products.
- Contrast the application of a plantwide overhead rate against activity-based costing techniques in the apportionment of overhead charges.
Verified Answer
TS
Thothadri Seshadri5 days ago
Final Answer :
B
Explanation :
To calculate the manufacturing overhead cost allocated to Product B82O using the plantwide overhead rate, we need to first calculate the total direct labor-hours for the company as a whole and for Product B82O.
Total Company Direct Labor-Hours:
50,000 + 20,000 + 30,000 + 40,000 = 140,000
Direct Labor-Hours for Product B82O:
20,000
Next, we can use the plantwide overhead rate to allocate overhead to Product B82O:
$1,510,000 / 140,000 labor-hours = $10.79 per labor-hour
20,000 labor-hours (for Product B82O) * $10.79 = $215,800
Therefore, the manufacturing overhead cost allocated to Product B82O using the plantwide overhead rate would be $215,800. Option B is the correct answer.
Total Company Direct Labor-Hours:
50,000 + 20,000 + 30,000 + 40,000 = 140,000
Direct Labor-Hours for Product B82O:
20,000
Next, we can use the plantwide overhead rate to allocate overhead to Product B82O:
$1,510,000 / 140,000 labor-hours = $10.79 per labor-hour
20,000 labor-hours (for Product B82O) * $10.79 = $215,800
Therefore, the manufacturing overhead cost allocated to Product B82O using the plantwide overhead rate would be $215,800. Option B is the correct answer.
Learning Objectives
- Inspect the impact that adopting an ABC system has on distributing manufacturing overhead costs across different products.
- Contrast the application of a plantwide overhead rate against activity-based costing techniques in the apportionment of overhead charges.