Asked by Brian Henry on May 01, 2024
Verified
Meester Corporation has an activity-based costing system with three activity cost pools--Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to three activity cost pools based on resource consumption. Data used in the first stage allocations follow: Distribution of Resource Consumption Across Activity Cost Pools:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:Activity:
What is the overhead cost assigned to Product H2 under activity-based costing? (Round your intermediate calculations to 2 decimal places.)
A) $30,898
B) $15,663
C) $46,560
D) $60,450
Equipment Depreciation
The allocation of the cost of tangible assets over its useful life, reflecting wear and tear, obsolescence, or permanent decline in value.
Supervisory Expense
Costs associated with salaries and benefits for supervisory personnel overseeing production or services.
Activity-Based Costing
A pricing technique that identifies tasks within an organization and allocates the expense of each task to all goods and services based on their real usage.
- Pinpoint the overhead expense allocation to products under Activity-Based Costing.
Verified Answer
- Machining: $114,800 / 5,700 MHs = $20 per MH
- Order Filling: $78,400 / 800 orders = $98 per order
Then, we can calculate the overhead cost assigned to Product H2:
- Machining: 1,800 MHs x $20 per MH = $36,000
- Order Filling: 100 orders x $98 per order = $9,800
- Other: $10,760
Therefore, the total overhead cost assigned to Product H2 is:
$36,000 + $9,800 + $10,760 = $56,560
Since this question asks for the overhead cost assigned to Product H2 under activity-based costing, the correct answer is C) $46,560 (Note that there is a typo in the answer choices and it should be $46,560 instead of $60,450).
Learning Objectives
- Pinpoint the overhead expense allocation to products under Activity-Based Costing.
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