How much overhead cost will be assigned to the dessert bar product line using activity-based costing (ABC)?
A)$340,750
B)$247,818
C)$16,000
D)$297,500
E)$313,500

Question

Quizplus · Accepted Answer

The allocation of overhead cost using activity-based costing (ABC) is as follows:
- Set up costs: $120,000 / 100 setups = $1,200 per setup
- Order processing costs: $150,000 / 15,000 orders = $10 per order
- Packaging costs: $90,000 / 20,000 units = $4.50 per unit
- Inspection costs: $80,000 / 2,000 hours = $40 per hour, and assuming each dessert sold requires 0.10 inspection hours, or 6 minutes, the inspection cost per unit is $4 ($40 per hour x 0.1 hour per unit)
Based on the above calculations, the total overhead cost assigned to the dessert bar product line is:
$1,200 per setup x 125 setups = $150,000 for set up
$10 per order x 5,000 orders = $50,000 for order processing
$4.50 per unit x 35,000 units = $157,500 for packaging
$4 per unit x 35,000 units = $140,000 for inspection
Total overhead cost = $497,500
Therefore, the answer is E: $313,500 overhead cost will be assigned to the dessert bar product line.

How Much Overhead Cost Will Be Assigned to the Dessert