Tech Inc.is a manufacturer that used traditional costing in the past, where over

Question

Tech Inc.is a manufacturer that used traditional costing in the past, where overhead costs were allocated based on a single predetermined rate using machine hours. The company recently switched to an activity-based costing system using different cost drivers for each of their two activities. Tech Inc. has provided the following data concerning its annual overhead and its activity based costing system:

Product A requires 300 orders and 14,000 machine hours. What is the total overhead cost assigned to Product A using Activity Based Costing?

Activity Cost Pools Total Cost Total Activity Rate Filling Orders $37,800 900 orders $42 per order Order Size $300,000 25,000 machine hours $12 per machine hour TOTAL $337,800

Explanation / Answer

Activity Cost Pools Product A Filling Orders 12600 =300*42 Order Size 168000 =14000*12 Total overhead cost assigned 180600 Option 1 is correct

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