Question

Carlise Corp., which manufactures ceiling fans, currently has two product lines, the Indoor and the Outdoor. Carlise has total overhead of $124,916. Carlise has identified the following information about its overhead activity cost pools and the two product lines:

Activity Cost Pools Cost Driver Cost Assigned to Pool Quantity/Amount Consumed by Indoor Line Quantity/Amount Consumed by Outdoor Line
Materials handling Number of moves $18,236 570 moves 370 moves
Quality control Number of inspections $77,420 5,600 inspections 4,200 inspections
Machine maintenance Number of machine hours $29,260 27,000 machine hours 11,000 machine hours

Required:
Suppose Carlise used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.

Answer 1

For indoor = $88,756

For outdoor = $72,666

Step-by-step explanation:

The computation of the amount of overhead assigned to each product line is given below:-

Traditional Costing

Machine Hours Overhead Assigned

Indoor Model 27,000 88,756

($124,916 ÷ 38,000) × 27,000

Outdoor Model 11,000 72,666

($124,916 ÷ 38,000) × 11,000

Total 38,000 $161,442