The estimated overhead for the cost pool,machine set-ups,is $180 000.The machines in the pool produce three products: X (300 set-ups); Y (200 set-ups)and Z (500 set-ups).If 20 000 units of product X are produced,the amount of machine set-up costs that will be assigned to each unit of X is:
A) $4.50
B) $1.80
C) $2.70
D) $9.00

Question

Quizplus · Accepted Answer

First, calculate the cost per set-up:

Cost per set-up = $180,000 / (300 + 200 + 500)
Cost per set-up = $180,000 / 1,000
Cost per set-up = $180

Next, calculate the amount of set-up costs assigned to each unit of Product X:

Set-up costs per unit of X = (300 set-ups / 1,000) * $180 / 20,000 units
Set-up costs per unit of X = $54 / 20,000 units
Set-up costs per unit of X = $0.0027 per unit or $2.70 per unit

Therefore, the answer is C) $2.70.

The Estimated Overhead for the Cost Pool,machine Set-Ups,is $180 000