Premium Pizza, Inc. is in the process of documenting all their costs using Activity-Based Costing (ABC). Premium specializes in unique sauces, and they have assigned the following Manufacturing Overhead (MOH) costs to their key activities: Moving and Sorting (150 pounds moved), $32,000; Quality Control (800 inspections completed), $22,400; and Cleaning/Maintenance (2,050 cleaning/maintenance hours) $16,820.
They bottled a total of 440 red sauce units and 336 white sauce units during the year. How much of the quality control MOH would be allocated to red sauce units?
A) $10,917.50
B) $16,100.00
C) $19,199.70
D) $26,217.50

Question

Premium Pizza, Inc. is in the process of documenting all their costs using Activity-Based Costing (ABC). Premium specializes in unique sauces, and they have assigned the following Manufacturing Overhead (MOH) costs to their key activities: Moving and Sorting (150 pounds moved), $32,000; Quality Control (800 inspections completed), $22,400; and Cleaning/Maintenance (2,050 cleaning/maintenance hours) $16,820.
 They bottled a total of 440 red sauce units and 336 white sauce units during the year. How much of the quality control MOH would be allocated to red sauce units?
A) $10,917.50 
B) $16,100.00 
C) $19,199.70 
D) $26,217.50

Quizplus · Accepted Answer

First, calculate an activity-based rate for the activity needed: quality control. Quality control: $22,400/800 inspections = $28.00 per inspection. Lastly, allocate the costs to the red sauce units based on that activity's level. Quality control: $28.00 × 575 inspections = $16,100.00 (Choice B).