Question

Kiner Co. computed an overhead rate for machining costs ($400000) of $5 per machine hour. Machining costs are driven by machine hours. If computed based on direct labor hours, the overhead rate for machining costs would be $10 per direct labor hour. The company produces two products, Cape and Chap. Cape requires 50400 machine hours and 20000 direct labor hours, while Chap requires 29600 machine hours and 30000 direct labor hours. Using activity-based costing, machining costs assigned to each product is:_______.

Cape Chap
a. $750000 $250000
b. $252000 $148000
c. $216615 $183385
d. $200000 $300000

Answer 1

b. $252000 $148000

Step-by-step explanation:

Total OH using MC Hrs = $400000

Mch Hr OH Rate = $5 per Mc Hr

No of Mc Hrs = $400000/5 = 80,000 Mc Hrs

Cape uses 50400 Mc Hrs. So Mc OH = 50400*$5 = $252,000

Chap uses 29600 Mc Hrs. So Mc OH = 29600*$5 = $148,000