Question

Trailers R Us​ Company, which uses an activitybased costing​ system, produces travel trailers and boat trailers. The company allocates batch setup costs to the two products using the following basic​ data: Travel trailers Boat trailers Budgeted units to be produced ​2,050 ​3,200 Budgeted number of setups 320 520 Budgeted number of direct labor hours per unit 40 80 Total budgeted setup costs for the year are​ $155,400. If the setup costs are allocated using number of​ setups, how much of the total setup costs would be allocated to boat​ trailers?

Answer 1

Boat trailers= $96,200

Step-by-step explanation:

Giving the following information:

Travel trailers Boat trailers:

Budgeted units to be produced ​2,050 ​3,200

Budgeted number of setups 320 520 = 840

Total budgeted setup costs for the year are​ $155,400.

First, we need to calculate the predetermined activity rate:

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

Setup= 155,400/840= $185 per setup

Now, we can allocate costs to boat trailers:

Boat trailers= 185*520= $96,200