Bohringer, Inc., manufactures and sells two products: Product A1 and Product X5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: The direct labor rate is $28.20 per DLH. The direct materials cost per unit is $256.50 for Product A1 and $165.20 for Product X5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The total overhead applied to Product A1 under activity-based costing is closest to:
A)$162,192
B)$224,568
C)$403,017
D)$318,720

Question

Bohringer, Inc., manufactures and sells two products: Product A1 and Product X5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:  The direct labor rate is $28.20 per DLH. The direct materials cost per unit is $256.50 for Product A1 and $165.20 for Product X5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:  The total overhead applied to Product A1 under activity-based costing is closest to:
A)$162,192 
B)$224,568 
C)$403,017 
D)$318,720

Quizplus · Accepted Answer

To calculate the overhead applied to Product A1 under activity-based costing, we need to follow these steps:

1. Calculate the total cost for each activity cost pool. 
- The total cost for Activity Cost Pool 1: 
      3,600 DLHs * $28.20 per DLH = $101,520 
- The total cost for Activity Cost Pool 2: 
      2,900 setups * $1,320 per setup = $3,828,000 
- The total cost for Activity Cost Pool 3: 
      4,800 material moves * $52 per move = $249,600

2. Calculate the cost driver rate for each activity: 
- Activity 1: 
      Cost driver rate = $101,520 / 3,600 DLHs = $28.20 per DLH 
- Activity 2: 
      Cost driver rate = $3,828,000 / 2,900 setups = $1,320 per setup 
- Activity 3: 
      Cost driver rate = $249,600 / 4,800 material moves = $52 per move

3. Calculate the overhead cost per unit for each product using the activity rates: 
- Product A1: 
      Activity 1 cost per unit = 2 DLHs * $28.20 per DLH = $56.40 
      Activity 2 cost per unit = 8 setups * $1,320 per setup / 2,000 units = $8.58 
      Activity 3 cost per unit = 16 material moves * $52 per move / 2,000 units = $0.83 
      Total activity cost per unit = $56.40 + $8.58 + $0.83 = $65.81 
- Product X5: 
      Activity 1 cost per unit = 3 DLHs * $28.20 per DLH = $84.60 
      Activity 2 cost per unit = 5 setups * $1,320 per setup / 1,000 units = $6.60 
      Activity 3 cost per unit = 24 material moves * $52 per move / 1,000 units = $1.25 
      Total activity cost per unit = $84.60 + $6.60 + $1.25 = $92.45

4. Multiply the overhead cost per unit by the expected production for each product to get the total overhead cost for each product: 
- Product A1: 
      Total activity cost for Product A1 = $65.81 per unit * 1,800 units = $118,458 
- Product X5: 
      Total activity cost for Product X5 = $92.45 per unit * 2,000 units = $184,900

5. Add up the total overhead cost for each product to get the total overhead cost applied under activity-based costing: 
      Total overhead cost for Product A1 = $118,458 
      Total overhead cost for Product X5 = $184,900 
      Total overhead cost applied = $118,458 + $184,900 = $303,358

Therefore, the closest answer choice is C) $403,017.