How much overhead cost will be assigned to each product line using activity-based costing (ABC)?
A)Dog food: $462,500; cat food: $462,500.
B)Dog food: $860,000; cat food: $65,000.
C)Dog food: $60,000; cat food: $45,000.
D)Dog food: $800,000; cat food: $20,000.
E)Dog food: $320; cat food: $320.

Question

Quizplus · Accepted Answer

Activity-based costing assigns overhead costs to products based on the activities required to produce them. The total overhead cost for the company is $925,000. Using ABC, the overhead costs are assigned as follows:
Dog food: ($390,000 / 6,500 units) x 13,000 units + ($470,000 / 39,700 direct labor hours) x 84,000 direct labor hours = $860,000
Cat food: ($35,000 / 2,500 units) x 13,000 units + ($30,000 / 39,700 direct labor hours) x 84,000 direct labor hours = $65,000. Therefore, Option B is correct.

How Much Overhead Cost Will Be Assigned to Each Product