Question

One of Hartman Company's activity cost pools is inspecting, with estimated overhead of $140,000. Hartman produces throw rugs (700 inspections) and area rugs (1,300 inspections). How much of the inspecting cost pool should be assigned to area rugs?

a. 75,384
b. 70,000
c. 140,000
d. 49,000

Answer 1

The options provided are incorrect. The correct answer is as follows

Answer:

Area rugs = $91000

Step-by-step explanation:

The overheads of the cost pool should be divided among the rugs based on the number of inspections carried out under each category divided by the total number of inspections in the cost pool. The division should be such that,

Inspection cost division

Throw rugs = 140000 * 700 / (700+1300)

Throw rugs = $49000

Area rugs = 140000 * 1300 / (700+1300)

Area rugs = $91000