Reck Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $11,700; Order Filling, $17,800; and Other, $13,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: What is the overhead cost assigned to Product V8 under activity-based costing?
A) $14,240
B) $3,627
C) $17,867
D) $21,500

Question

Reck Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $11,700; Order Filling, $17,800; and Other, $13,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:  What is the overhead cost assigned to Product V8 under activity-based costing?
A) $14,240 
B) $3,627 
C) $17,867 
D) $21,500

Quizplus · Accepted Answer

Total MHs = 6,900 MHs + 3,100 MHs = 10,000 MHs
Machining: $11,700 ÷ 10,000 MHs = $1.17 per MH
Total orders = 200 orders + 800 orders = 1,000 orders
Order Filling: $17,800 ÷ 1,000 orders = $17.80 per order
Overhead cost for Product V8:
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Reck Corporation Uses Activity-Based Costing to Assign Overhead Costs to Products