Immen Corporation manufactures two products: Product B82O and Product P99Y. The company uses a plantwide overhead rate based on direct labor-hours. It 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 B82O and P99Y. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product B82O?
A) $704,200
B) $301,800
C) $610,000
D) $503,000

Question

Immen Corporation manufactures two products: Product B82O and Product P99Y. The company uses a plantwide overhead rate based on direct labor-hours. It 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 B82O and P99Y.  Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product B82O?
A) $704,200 
B) $301,800 
C) $610,000 
D) $503,000

Quizplus · Accepted Answer

To calculate the manufacturing overhead cost allocated to Product B82O using the plantwide overhead rate, we need to first calculate the total direct labor-hours for the company as a whole and for Product B82O.

Total Company Direct Labor-Hours: 
50,000 + 20,000 + 30,000 + 40,000 = 140,000

Direct Labor-Hours for Product B82O: 
20,000

Next, we can use the plantwide overhead rate to allocate overhead to Product B82O:
$1,510,000 / 140,000 labor-hours = $10.79 per labor-hour
20,000 labor-hours (for Product B82O) * $10.79 = $215,800

Therefore, the manufacturing overhead cost allocated to Product B82O using the plantwide overhead rate would be $215,800. Option B is the correct answer.

Immen Corporation Manufactures Two Products: Product B82O and Product P99Y