Yang Manufacturing Company manufactures two products (A and B). The overhead cos
ID: 2575447 • Letter: Y
Question
Yang Manufacturing Company manufactures two products (A and B). The overhead costs (£60,000) have been divided into three cost pools that use the following activity cost drivers/location bases: Number of labour (A-15, B-10); Product Number of Orders (A-50, B-150); Transactions labour Hours (A-500, B-2,000). The amount of overhead cost to be assigned to Product B using product Number of Orders as the allocation base is Yang Manufacturing Company manufactures two products (A and B). The overhead costs (£60,000) have been divided into three cost pools that use the following activity cost drivers/location bases: Number of labour (A-15, B-10); Product Number of Orders (A-50, B-150); Transactions labour Hours (A-500, B-2,000). The amount of overhead cost to be assigned to Product B using product Number of Orders as the allocation base isExplanation / Answer
Total overhead cost = 60000
Total number of orders = 50+150 = 200
Amount of overhead to be assigned to product B = (Total ordering Cost/ 200) * 150
Ordering cost is the part of total overhead which is not given in question.
Total overhead cost of 60000 consists of 3 parts as per above question:
- Labour cost
- Ordering cost
- Transaction labour cost
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