Rusties Company recently implemented an activity-based costing system. At the be

Question

Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company's five activity cost pools Expected Overhead Cost $21,840 $ 980 $ 5,330 $ 2,040 Expected Activity Cost Pool Labor-related Purchase orders Product testing Template etching General factory Activity Measure Activity Direct labor-hours Number of orders Number of tests Number of templates Machine-hours 1,820 DLHs 490 orders 410 tests 85 templates $57,000 11,400 MHs 2. The expected activity for the year was distributed among the company's four products as follows Expected Activit Activity cost Pool Labor-related (DLHs) Purchase orders (orders) Product testing (tests) Template etching (templates) General factory (MHs) ProductA Product B Product C Product D 675 70 270 145 110 60 500 190 500 120 80 3,400 3,000 2,000 3,000 Using the ABC data, determine the total amount of overhead cost assigned to each product. Total Overhead Cost Product A Product B ProductC ProductD

Explanation / Answer

2 Product A: Labor ralated 8100 =21840/1820*675 Purchase orders 140 =980/490*70 Product testing 3510 =5330/410*270 Template etching 0 =2040/85*0 General factory 17000 =57000/11400*3400 Total overhead cost 28750 Product B: Labor ralated 1740 =21840/1820*145 Purchase orders 220 =980/490*110 Product testing 780 =5330/410*60 Template etching 1608 =2040/85*67 General factory 15000 =57000/11400*3000 Total overhead cost 19348 Product C: Labor ralated 6000 =21840/1820*500 Purchase orders 380 =980/490*190 Product testing 0 =5330/410*0 Template etching 360 =2040/85*15 General factory 10000 =57000/11400*2000 Total overhead cost 16740 Product D: Labor ralated 6000 =21840/1820*500 Purchase orders 240 =980/490*120 Product testing 1040 =5330/410*80 Template etching 72 =2040/85*3 General factory 15000 =57000/11400*3000 Total overhead cost 22352 Total overhead cost Product A 28750 Product B 19348 Product C 16740 Product D 22352

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