Question

Franklin, Inc uses activity-based costing. The company produces X and Y. Information relating to the two products is as follows:

X Y
Units produced 38,000 50,000
Machine-hours 15,000 17,000
Direct labor-hours 16,000 24,000
Materials handling (number of moves) 8,000 12,000
Setups 10,000 14,000
The following costs are reported:
Materials handling $160,000
Labor-related overhead 480,000
Setups 240,000
Labor-related overhead costs assigned to product X are:________
A. $192,000
B. $232,000
C. $288,000
D. $272,500

Answer 1

A. $192,000

Step-by-step explanation:

The computation of the labor related overhead cost is shown below:

= (Labor related overhead cost) ÷ (Total direct labor hours) × direct labor hours of X

= ($480,000) ÷ (16,000 hours + 24,000 hours) × 16,000 hours

= $192,000

hence, the correct option is A.