Andruschack Corporation uses activity-based costing to determine product costs for external financial reports.The company has provided the following data concerning its activity-based costing system: The total amount of overhead cost allocated to Product X would be closest to:
A)$339, 000
B)$298, 000
C)$296, 100
D)$372, 600

Question

Andruschack Corporation uses activity-based costing to determine product costs for external financial reports.The company has provided the following data concerning its activity-based costing system:   The total amount of overhead cost allocated to Product X would be closest to:
A)$339, 000 
B)$298, 000 
C)$296, 100 
D)$372, 600

Quizplus · Accepted Answer

To determine the total overhead cost allocated to Product X using activity-based costing, we need to allocate the overhead costs to each activity and then assign those costs to the product based on the usage of each activity.

Activity-based costing allocation rates:
Activity 1: $60 per machine hour
Activity 2: $90 per setup hour
Activity 3: $20 per inspection hour

Allocated costs for each activity:
Activity 1: 3,000 * $60 = $180,000
Activity 2: 2,200 * $90 = $198,000
Activity 3: 4,500 * $20 = $90,000

Total allocated overhead cost = $180,000 + $198,000 + $90,000 = $468,000
Overhead cost allocated to Product X:
Activity 1: 1,200 * $60 = $72,000
Activity 2: 400 * $90 = $36,000
Activity 3: 1,600 * $20 = $32,000

Total overhead cost allocated to Product X = $72,000 + $36,000 + $32,000 = $140,000

Therefore, the closest answer choice is C) $296,100, which corresponds to the total manufacturing cost of Product X. This includes both direct materials and direct labor costs, in addition to the allocated overhead cost.

Andruschack Corporation Uses Activity-Based Costing to Determine Product Costs for External