Question

Morrow Co. produces three products: Beta, Delta, and Gamma. Beta requires 400 purchase orders, Delta requires 600 purchase orders, and Gamma requires 1,000 purchase orders. Morrow has identified an ordering and receiving activity cost pool with allocated overhead of $180,000. The cost driver for the pool is purchase orders. Direct labor hours used on each product are 50,000 for Beta, 40,000 for Delta, and 110,000 for Gamma. How much ordering and receiving overhead is assigned to each product?

A : Beta, $40,500; Delta, $45,000; Gamma, $94,500B Beta, $45,000; Delta, $36,000; Gamma, $99,000C : Beta, $36,000; Delta, $54,000; Gamma, $90,000D : Beta, $60,000; Delta, $60,000; Gamma, $60,000

Answer 1

C : Beta, $36,000; Delta, $54,000; Gamma, $90,000

Step-by-step explanation:

For computing the overhead assigned to each product, first, we have to compute the cost for each purchase order which is shown below:

Cost for each purchase order = (Total allocated overhead) ÷ (total number of orders)

= ($180,000 ÷ 2,000 orders)

= $90

Now we can compute easily

For Beta = Purchase orders × cost for each purchase order

= 400 orders × $90

= $36,000

For Delta = Purchase orders × cost for each purchase order

= 600 orders × $90

= $54,000

And, for Gamma = Purchase orders × cost for each purchase order

= 1,000 orders × $90

= $90,000