Dawson Company manufactures two products,Regular and Deluxe.Overhead costs consist of machining,$2,500,000; and assembly,$1,250,000.Recent data are provided below: Regular Deluxe
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead allocated to Regular using a single overhead rate based on number of parts and using activity based costing,respectively,are:
A)$2,400,000 and $2,625,000
B)$937,500 and $2,812,500
C)$1,350,000 and $1,125,000
D)$1,075,000 and $2,675,000

Question

Quizplus · Accepted Answer

Using a single overhead rate based on the number of parts, the overhead allocated to Regular is (90,000 / (90,000 + 160,000)) * ($2,500,000 + $1,250,000) = $1,350,000. Using activity-based costing, allocate machining costs based on machine hours and assembly costs based on direct labor hours: (10,000 / (10,000 + 30,000)) * $2,500,000 + (10,000 / (10,000 + 15,000)) * $1,250,000 = $1,125,000.

Dawson Company Manufactures Two Products,Regular and Deluxe