Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman’s

Question

Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman’s overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000. Information on the two products is:

Board 12                      Case 165

Direct labor hours                    15,000                         25,000

Machine setups                        600                              400

Machine hours                         24,000                         26,000

Inspections                              800                              700

Overhead applied to Case 165 using activity-based costing is?

$3,840,000

$4,608,000

$4,992,000

$6,000,000

Explanation / Answer

Overhead applied to Case 165 using activity-based costing is $4,608,000 Particulars Amount a Activity Driver No of Activity b Cost per activity c= a/b No of Activity of Board 12 d Cost Allocated to Board 12 c*d No of Activity of case 165 e Cost Allocated to case 165 c*e setting up machines,        2,400,000.00 Machine set ups                    1,000.00                2,400.00                   600.00           1,440,000.00                     400.00        960,000.00 machining        5,400,000.00 Machine hours                 50,000.00                    108.00             24,000.00           2,592,000.00               26,000.00     2,808,000.00 inspecting        1,800,000.00 Inspections                    1,500.00                1,200.00                   800.00               960,000.00                     700.00        840,000.00 Total Overhead        9,600,000.00           4,992,000.00     4,608,000.00

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