Company manufactures and distributes two products, R and S. Overhead costs are c

Question

Company manufactures and distributes two products, R and S. Overhead costs are currently allocated using r of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information: Amount Activity Production setups Number of setups $ 82.000 Material handling Number of parts 48,000 Packaging costs Number of units 130,00080,000 50,000 Cost Driver 56 24 $260,000 L What is the total overhead allocated to Product R using the current system? A. $113,600. B. $130,000. C. $146,400. D. $160,000.

Explanation / Answer

Total overhead allocated to Product R = Production setups + Material handling + Packaging costs

= ($82,000*8/20) + ($48,000*56/80) + ($130,000*80,000/130,000)

= $32,800 + $33,600 + $80,000

= $146,400

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