Question

Barnes Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 22 8 375 Deluxe 28 12 225 Overhead costs $20,000 $40,000 Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the standard model?

Answer 1

Standard= $24,800

Step-by-step explanation:

Giving the following information:

Number of: Setups Components

Standard 22 8

Deluxe 28 12

Overhead costs $20,000 $40,000

First, we need to calculate the predetermined overhead rate for each activity:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Setups= 20,000 / (22+28)= $400per setup

Components= 40,000 / (8+12)= $2,000 per component

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Standard= 400*22 + 2,000*8

Standard= $24,800