PA8. A company has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing: Estimated Activity Activity Center Product 1 Product 2 Estimated Cost Machine setups Assembly parts Packaging pieces Machine hour per unit Production volume 15 3,000 500 4 45 3,000 400 3. $ 10,800 144,600 55,350 750 1,500 A. How much overhead would be allocated to each unit under the traditional allocation method? B. How much overhead would be allocated to each unit under activity- based costing?

PA8. A company has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing: Estimated Activity Activity Center Product 1 Product 2 Estimated Cost Machine setups Assembly parts Packaging pieces Machine hour per unit Production volume 15 3,000 500 4 45 3,000 400 3. $ 10,800 144,600 55,350 750 1,500 A. How much overhead would be allocated to each unit under the traditional allocation method? B. How much overhead would be allocated to each unit under activity- based costing?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question: Pat Company uses activity-based costing. The company has two products: A and B. The annual production and sales for Product A is 1,800 units and for Product B it's 1,050 units. There are three activity cost pools, with estimated costs and expected activity as follows: Activities Estimated Expected Activity Overhead Cost Product A Product Total B Activity 1 $46,775 1,300 1,200 2,500 Activity 2 $68,277 2,300 1,000 3,300 Activity 3 $82,502 The overhead cost per unit of Product A under activity-based costing is closest to: 720 700 1,420 A. $139.12 B. $68.28 C. $32.88 D. $63.19
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