Lysiak Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment depreciation and supervisory expense-are allocated to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Distribution of Resource Consumption Across Activity Cost Pools:
In the second stage, 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 for the company's two products follow:
Activity:
What is the overhead cost assigned to Product C9 under activity-based costing?
A) $26,500
B) $21,942
C) $1,180
D) $23,122

Question

Lysiak Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment depreciation and supervisory expense-are allocated to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below:  Distribution of Resource Consumption Across Activity Cost Pools:
 In the second stage, 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 for the company's two products follow:
Activity:
 What is the overhead cost assigned to Product C9 under activity-based costing?
A) $26,500 
B) $21,942 
C) $1,180 
D) $23,122

Quizplus · Accepted Answer

Assign overhead costs to products:
Machining: $31,800 ÷ 10,000 MHs = $3.18 per MH
Order Filling: $5,900 ÷ 1,000 orders = $5.90 per order
Overhead cost for Product C9:
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Lysiak Corporation Uses an Activity Based Costing System to Assign