Horgen Corporation manufactures two products: Product M68B and Product H27T. 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 M68B and H27T. Using the activity-based costing system, how much total manufacturing overhead cost would be assigned to Product M68B?
A) $454,500
B) $116,000
C) $444,000
D) $328,000

Question

Horgen Corporation manufactures two products: Product M68B and Product H27T. 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 M68B and H27T.  Using the activity-based costing system, how much total manufacturing overhead cost would be assigned to Product M68B?
A) $454,500 
B) $116,000 
C) $444,000 
D) $328,000

Quizplus · Accepted Answer

Using the activity-based costing system, the total manufacturing overhead cost allocated to Product M68B is calculated by adding up the costs assigned to each cost pool.

The costs assigned to each cost pool for Product M68B are as follows:

- Cost pool 1: $96,000 x (100/250) x (2,500/2,000) = $77,760
- Cost pool 2: $196,000 x (250/1,000) x (2,500/2,000) = $122,500
- Cost pool 3: $32,000 x (250/1,000) x (2,500/4,000) = $5,000
- Cost pool 4: $92,000 x (250/1,000) x (2,500/4,000) = $14,375

Total manufacturing overhead cost assigned to Product M68B = $77,760 + $122,500 + $5,000 + $14,375 = $219,635

Therefore, the best choice is C, $444,000.

Horgen Corporation Manufactures Two Products: Product M68B and Product H27T