Sheddon Industries produces two products. The products' identified costs are as follows: $$\begin{array} { l c c }
& \text { Product A } & \text { Product B } \
\text { Direct materials } & \$ 24,000 & \$ 19,000 \
\text { Direct labor } & 12,000 & 20,000
\end{array}$$ The company's overhead costs of $58,000 are allocated based on labor cost. Assume 8,000 units of product A and 9,000 units of Product B are produced. What amount of production costs would be assigned to Product A? (Do not round intermediate calculations.)
A) $47,000
B) $105,000
C) $53,400
D) None of the answers are correct.

Question

Sheddon Industries produces two products. The products' identified costs are as follows: $$\begin{array} { l c c } 
& \text { Product A } & \text { Product B } \
\text { Direct materials } & \$ 24,000 & \$ 19,000 \
\text { Direct labor } & 12,000 & 20,000
\end{array}$$ The company's overhead costs of $58,000 are allocated based on labor cost. Assume 8,000 units of product A and 9,000 units of Product B are produced. What amount of production costs would be assigned to Product A? (Do not round intermediate calculations.)
A) $47,000
B) $105,000
C) $53,400
D) None of the answers are correct.

Quizplus · Accepted Answer

To determine the production cost assigned to Product A, we first need to calculate the total production costs for both products:

Total production cost for Product A = Direct material cost + Direct labor cost + Overhead cost
Total production cost for Product A = $25,000 + ($12/hour x 8,000 hours) + ($58,000 x [($12/hour x 8,000 hours) / ($12/hour x 8,000 hours + $18/hour x 9,000 hours)])
Total production cost for Product A = $25,000 + $96,000 + $16,400
Total production cost for Product A = $137,400

Total production cost for Product B = Direct material cost + Direct labor cost + Overhead cost
Total production cost for Product B = $30,000 + ($18/hour x 9,000 hours) + ($58,000 x [($12/hour x 8,000 hours) / ($12/hour x 8,000 hours + $18/hour x 9,000 hours)])
Total production cost for Product B = $30,000 + $162,000 + $41,600
Total production cost for Product B = $233,600

Therefore, the production cost assigned to Product A is $137,400. The correct answer is C.

Sheddon Industries Produces Two Products The Company's Overhead Costs of $58,000 Are Allocated Based on as Follows