Question

Peters, Inc. produces 3 products: P1, Q2, and R3. P1 requires 400 purchase orders, Q2 requires 600 purchase orders, and R3 requires 1000 purchase orders. Peters has identified an ordering and receiving activity cost pool with allocated overhead of $180000 for which the cost driver is purchase orders. Direct labor hours used on each product are 50000 for P1, 40000 for Q2, and 110000 for R3. How much ordering and receiving overhead is assigned to each product?

P1 Q2 B2
(A) $80,000 $80,000 $80,000
(B) $60,000 $48,000 $132,000
(C) $48,000 $72,000 $120,000
(D) $54 000 $60,000 $126,000

Answer 1

P1 $36,000

Q2 $54,000

B2 $90,000

Step-by-step explanation:

For computing each ordering and receiving overhead assigned, first we have to calculate the price per order which is shown below:

= Total cost of purchase orders ÷ total purchase orders

where,

Total purchase orders = P1 purchase orders + Q2 purchase orders + R3 purchase orders

= 400 + 600 + 1,000

= 2,000 purchase orders

And, the Total cost of purchase orders is $180,000

Now put these values to the above formula

So, the price would equal to

= $180,000 ÷ 2,000 orders

= $90

Now we can compute easily.

For P1 = Purchase orders × price per order

= 400 × $90

= $36,000

For Q2 = Purchase orders × price per order

= 600 × $90

= $54,000

For R3 = Purchase orders × price per order

= 1,000 × $90

= $90,000

The given options are not correct