Windsor Co. incurs $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000). The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year. Information about Windsor's two products is as follows: $\begin{array}{lrr}&\text { Broduct } X &\text { Broduct } Y\
\text { Machining hours } & 1,000 & 3,000 \
\text { Inspections } & 100 & 500 \
\text { Orders packed } & 350 & 650 \
\text { Direct labor hours } & 1,700 & 1,800
\end{array}$ Using ABC, how much overhead is assigned to Product X this year?

Question

Quizplus · Accepted Answer

To calculate the overhead assigned to Product X using Activity-Based Costing (ABC), we first determine the overhead rates for each department:1. Machining: $600,000 / 4,000 hours = $150 per hour2. Inspections: $300,000 / 600 inspections = $500 per inspection3. Packing: $150,000 / 1,000 orders = $150 per orderNext, we calculate the overhead for Product X:- Machining: 1,000 hours * $150/hour = $150,000- Inspections: 100 inspections * $500/inspection = $50,000- Packing: 350 orders * $150/order = $52,500Total overhead for Product X = $150,000 + $50,000 + $52,500 = $252,500

Windsor Co Using ABC, How Much Overhead Is Assigned to Product X