Question

Rocoe Company produces a variety of garden tools in a highly automated manufacturing facility. The costs and cost drivers associated with four activity cost pools are given below: Activities: Unit Level Batch Level Product Level Facility Level Total Cost $40,800 $13,800 $9,600 $50,400 Total Cost Driver Volume 6,800 labor hours 276 set ups % of use 50,400 units Production of 10,000 units of a handheld tiller required 310 labor hours, 40 setups, and consumed 25% of the product sustaining activities. Assuming the company uses activity-based costing, how much total overhead will be allocated to this tool

Answer 1

$16,260

Step-by-step explanation:

The computation of total overhead is shown below:-

Unit level = $40,800 ÷ 6,800 × 310 $1,860

Batch level = $13,800 ÷ 276 × 40 $2,000

Product Level = $9,600 ÷ 100 × 25% $2,400

Facility level = $50,400 ÷ $50,400 × 10,000 units $10,000

Total overhead allocated $16,260

So, for computing the total overhead allocated we simply added the unit level, batch level, product level and facility level.