Question

Jones, Inc. produces 3 products: AKM, BWT, and CPQ. Product AKM requires 400 purchase orders, Product BWT requires 600 purchase orders, and Product CPQ requires 1,000 purchase orders. The company has identified an ordering and receiving activity cost pool with allocated overhead of $236,000 for which the cost driver is purchase orders. How much ordering and receiving overhead is assigned to Product AKM?

A. $70,800
B. $47,200
C. $236,000
D. $59,000

Answer 1

To determine the ordering and receiving overhead assigned to Product AKM, calculate the overhead allocation based on the number of purchase orders for each product.The correct answer is option B.

Step-by-step explanation:

To determine the amount of ordering and receiving overhead assigned to Product AKM, we need to calculate the overhead allocation based on the number of purchase orders for each product.

First, we calculate the total number of purchase orders for all products:

Total purchase orders = 400 + 600 + 1,000 = 2,000 purchase orders

Next, we calculate the overhead allocation for Product AKM:

Overhead allocated to Product AKM = (Number of purchase orders for AKM / Total purchase orders) * Allocated overhead

= (400 / 2,000) * $236,000 = $47,200

Therefore, the ordering and receiving overhead assigned to Product AKM is $47,200.