Terry Industries produces two electronic decoders, P and Q. Decoder P is more so

Question

Terry Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows. Cost Pool Total Cost Driver Activity Pools Repair and maintenance on assembly machine Programming cost Software inspections Product testing 52,000 Number of units produced 84,000 6,000 8,000 Number of programming hours Number of inspections Number of tests Total overhead cost $150,000 Expected activity for each product follows Number of Hours 2,000 1,500 Number of Inspections Number of Tests Number Programming of Units Decoder P 16,000 Decoder 36,000 190 1,400 1,100 60 Total 52,000 3,500 250 2,500

Explanation / Answer

A) Decoder P Decoder Q Repair and maintenance on assembly line $                  1.00 $                                                              1.00 52000/52000 52000/52000 Programming cost $               24.00 $                                                           24.00 84000/3500 84000/3500 Software inspections $               24.00 $                                                           24.00 6000/250 6000/250 Product Testing $                  3.20 $                                                              3.20 8000/2500 8000/2500 B) Allocated cost: Decoder P $       73,040.00 16000*1+2000*24+190*24+1400*3.2 Decoder Q $       76,960.00 36000*1+1500*24+60*24+1100*3.2

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