Aimee Cosmetics Company uses the following allocation rates from its activity-based costing system to assign overhead costs to products: $$\begin{array} { | l | l | }
\hline \text { Activity } & \text { Allocation Rate } \
\hline \text { Purchasing raw materials } & \$ 40 \text { per purchase order } \
\hline \text { Setting up machines for production } & \$ 150 \text { per set-up } \
\hline \text { Inspecting finished products } & \$ 25 \text { per inspection } \
\hline
\end{array}$$ Product A1 uses the following:
17 purchase orders
4 set-ups
12 inspections How much overhead cost would be assigned to Product A1?
A) $7,095
B) $215
C) $600
D) $1,580

Question

Aimee Cosmetics Company uses the following allocation rates from its activity-based costing system to assign overhead costs to products: $$\begin{array} { | l | l | } 
\hline \text { Activity } & \text { Allocation Rate } \
\hline \text { Purchasing raw materials } & \$ 40 \text { per purchase order } \
\hline \text { Setting up machines for production } & \$ 150 \text { per set-up } \
\hline \text { Inspecting finished products } & \$ 25 \text { per inspection } \
\hline
\end{array}$$ Product A1 uses the following:
17 purchase orders
4 set-ups
12 inspections How much overhead cost would be assigned to Product A1?
A) $7,095
B) $215
C) $600
D) $1,580

Quizplus · Accepted Answer

The overhead cost assigned to Product A1 is calculated by multiplying the number of each activity by its respective allocation rate and summing these products: (17 purchase orders * $40) + (4 set-ups * $150) + (12 inspections * $25) = $680 + $600 + $300 = $1,580.

Aimee Cosmetics Company Uses the Following Allocation Rates from Its