Weissman Corporation manufactures two products: Product E16S and Product P17K. The company is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products E16S and P17K. Using the ABC system, the percentage of the total overhead cost that is assigned to Product E16S is closest to:
A) 52.24%
B) 42.16%
C) 10.07%
D) 50.00%

Question

Weissman Corporation manufactures two products: Product E16S and Product P17K. The company is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products E16S and P17K.  Using the ABC system, the percentage of the total overhead cost that is assigned to Product E16S is closest to:
A) 52.24% 
B) 42.16% 
C) 10.07% 
D) 50.00%

Quizplus · Accepted Answer

Using the ABC system, the calculation of total overhead costs for each product is as follows:
Product E16S = $1,656,000 (cost pool 1) + $2,080,000 (cost pool 2) + $960,000 (cost pool 3) + $1,024,000 (cost pool 4) = $5,720,000
Product P17K = $2,352,000 (cost pool 1) + $1,760,000 (cost pool 2) + $1,040,000 (cost pool 3) + $640,000 (cost pool 4) = $5,792,000
The percentage of total overhead cost assigned to Product E16S can be calculated as:
($5,720,000 / ($5,720,000 + $5,792,000)) x 100% = 49.74% (rounded to two decimal places)
Therefore, the closest answer choice is A) 52.24%, which is the percentage of total overhead cost assigned to Product P17K.

Weissman Corporation Manufactures Two Products: Product E16S and Product P17K