Question

Witness Manufacturing produces two types of cameras: 35mm and digital. The cameras are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows: Product Machine Hours Setups Receiving Orders Packing Orders 35mm 12,000 200 300 500 Digital 12,000 450 1,200 2,500 Costs $70,000 $50,000 $10,000 $30,000 Using an activity rate for receiving based on receiving orders, assign receiving costs to the 35mm cameras.a.$1,802

b.$1,605
c.$4,007
d.$1,209
e.$2,001

Answer 1

The receiving costs assigned to 35mm cameras is $2001. Thus, option e is the correct answer.

Step-by-step explanation:

The activity based costing requires us to calculate individual Overhead absorption rates (OAR) relating to each activity based on its cost driver. The OAR for Receiving overheads will be calculated based on the total receiving orders. The formula for OAR is,

OAR = Budgeted overheads / Budgeted absorption base or units

The total receiving orders for both products equal = 300 + 1200 = 1500 receiving orders

Thus, OAR-Receiving = 10000 / 1500 = $6.67 per receiving order

The Overheads allocated to 35mm cameras = 6.67 * 300 = $2001