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Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information: Activity Cost Driver Amount M XY Production setups Number of setups $ 82,000 8 12 Material handling Number of parts 48,000 56 24 Packaging costs Number of units 130,000 80,000 50,000 $ 260,000 What is the total overhead allocated to Product XY using the current system

Respuesta :

Answer:

$113,600

Explanation:

According to the scenario, computation of the given data are as follows:-  

Particular  Activity cost driver    Amount   Product M  Product XY   Total  

Production setup   No. of prod.  $82,000       8         12          20

Material handling No. of parts  $48,000       56         24      80

Packaging costs No. of units  $1,30,000    80,000     50,000    130,000

                                     $2,60,000  

     

Allocation to Product XY

Production Set up = Production Set up Amount ÷ Number of Total Production Set up × Number of Product XY Setup

= $82,000 ÷ 20 × 12

= $49,200

Material Handling = $48,000 ÷ 80 × 24 = $14,400

Packaging Costs = $130,000 ÷ 130,000 × 50,000 = $50,000

Total overhead = Production Set up + Material Handling + Packaging Costs

= $49,200 + $14,400 + $50,000

= $113,600