X Company uses an activity-based costing overhead allocation system. It has iden
ID: 2344882 • Letter: X
Question
X Company uses an activity-based costing overhead allocation system. It has identified three activities and three cost drivers. The activities and budgeted costs are as follows:Activity Budgeted Cost
Material Handling $109,000
Purchasing 56,000
Packaging 54,000
The following cost driver information is available for the company's only two products, A and B:
Product A Product B
pounds of material $27,800 $66,000
purchase orders 54,200 43,900
packages 63,700 45,400
How much overhead was allocated to Product A?
Explanation / Answer
Allocated to product A: Material handling: 109,000*(27,800/(27800+66000)) = 32304.90 purchasing: 56,000*(54,200/(54200+43900)) = 30939.86 packaging: 54,000*(63,700/(63,700+45,400)) = 31528.87 total: 32304.90 + 30939.86 + 31528.87 = 94773.63 answer: $94,773.63
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