Bradley Company makes and sells two products: Product 1 and Product 2. The compa
ID: 2340825 • Letter: B
Question
Bradley Company makes and sells two products: Product 1 and Product 2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Est. Overhead
Cost
Expected Activity
Activity Cost Pools
Activity Measures
Product 1
Product 2
Total
Labor-related
Labor hours
$296,390
2,700
8,000
10,700
Production orders
Orders
$55,587
300
400
700
Order size
Machine hours
$579,866
5,000
4,700
9,700
$931,843
Complete the following in order to determine the total overhead to be applied to Product 2 under activity-based costing:
Activity Cost Pools
Estimated Overhead Cost
Total Expected Activity
Activity Rate
Labor-related
per
Production orders
per
Order size
per
Product 2
Activity Cost Pools
Activity Rate
Expected Activity
Amount
Labor-related
Production orders
Order size
Total overhead costs assigned
Est. Overhead
Cost
Expected Activity
Activity Cost Pools
Activity Measures
Product 1
Product 2
Total
Labor-related
Labor hours
$296,390
2,700
8,000
10,700
Production orders
Orders
$55,587
300
400
700
Order size
Machine hours
$579,866
5,000
4,700
9,700
$931,843
Explanation / Answer
Activity Cost Pools Estimated Overhead Cost Total Expected Activity Activity Rate Labor-related 296390 10700 27.7 per Labor hour Production orders 55587 700 79.41 per order Order size 579866 9700 59.78 per Machine hour Product 2 Activity Cost Pools Activity Rate Expected Activity Amount Labor-related 27.7 8000 221600 Production orders 79.41 400 31764 Order size 59.78 4700 280966 Total overhead costs assigned 534330
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