How much overhead cost will be assigned to the ice cream sandwich product line using activity-based costing (ABC)?
A)$340,000
B)$368,000
C)$28,000
D)$850.08
E)$433,682

Question

Quizplus · Accepted Answer

Using activity-based costing, the ice cream sandwich product line would be assigned overhead costs based on the following activities and their corresponding costs:

Activity 1: Material handling 
Cost: $50,000

Activity 2: Mixing and freezing 
Cost: $180,000

Activity 3: Packaging and inspecting 
Cost: $138,000

Activity 4: General factory 
Cost: $50,000

Using the activity rates for each activity, we can calculate the overhead costs assigned to the ice cream sandwich product line as follows:

Activity 1: 
Ice cream sandwiches use 10% of material handling resources = $5,000

Activity 2: 
Ice cream sandwiches use 40% of mixing and freezing resources = $72,000

Activity 3: 
Ice cream sandwiches use 30% of packaging and inspecting resources = $41,400

Activity 4: 
Ice cream sandwiches use 20% of general factory resources = $10,800

Total overhead cost assigned to ice cream sandwich product line = $5,000 + $72,000 + $41,400 + $10,800 = $129,200

Adding this amount to the direct costs for the ice cream sandwich product line ($238,800) gives a total cost of $368,000. Hence, the answer is B.

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