Symphonix Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $12,000. Additional information is as follows: $$\begin{array} { l c c }
& \text { Small Pumps } & \text { Large Pumps } \
\text { Units inspected } & 120 & 120 \
\text { Hours spent inspecting } & 2.5 & 17.5 \
\text { Direct labor hours per unit } & 2 & 2
\end{array}$$ Under a traditional costing system that assigns overhead on the basis of units inspected, the inspection costs allocated to one small pump would be:
A) $875
B) $50
C) $2.50
D) $300

Question

Symphonix Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $12,000. Additional information is as follows: $$\begin{array} { l c c } 
& \text { Small Pumps } & \text { Large Pumps } \
 \text { Units inspected } & 120 & 120 \
\text { Hours spent inspecting } & 2.5 & 17.5 \
\text { Direct labor hours per unit } & 2 & 2
\end{array}$$ Under a traditional costing system that assigns overhead on the basis of units inspected, the inspection costs allocated to one small pump would be:
A) $875
B) $50
C) $2.50
D) $300

Quizplus · Accepted Answer

Under a traditional costing system that assigns overhead based on units inspected, the total inspection costs of $12,000 would be allocated equally to each unit inspected since both Small Pumps and Large Pumps have the same number of units inspected (120 each). Therefore, each unit (whether small or large pump) would be allocated $12,000 / (120 + 120) = $12,000 / 240 = $50 per unit.

Symphonix Corporation Is Preparing Its Annual Budget Under a Traditional Costing System That Assigns Overhead on the Its