Question

Orange, Inc. has identified the following cost drivers for its expected overhead costs for the year:

Cost Pool -- Budgeted Cost - Cost Driver - Cost Driver Lvl
Setup - 40,000 - Number of setups - 200
Ordering - 20,000 - Number of orders - 1,000
Maintenance - 50,000 - Machine Hours - 5,000
Power- 10,000 - Kilowatt Hours - 10,000

Total direct labor hours budgeted = 2,000 hours.

The following data applies to Product X, one of the products completed during the year

Direct Materials - 1,000
Direct Labor - 1,200
Unites completed - 100
Direct labor hours - 40
Number of setups - 4
Number of orders - 8
Machine Hours - 50
Kilowatt hours - 100

If a volume-based costing system based on direct labor hours to assign overhead is used, the total overhead cost for Product X will be: ________

Answer 1

the total overhead cost is $1,560

Step-by-step explanation:

The computation of the total overhead cost for product X is given below:

Setup cost = 40,000 ÷ 200 × 4 = 800

Ordering cost = 20,000 ÷ 1,000 × 8 = 160

Maintenance cost = 50,000 ÷ 5,000 × 50 = 500

Power = 10,000 ÷ 10,000 × 100 = 100

Hence, the total overhead cost is $1,560