Shaver Co. manufactures a variety of electric razors for men and women. The company's plant is partially automated. Listed below is cost driver information used in the product-costing system:Using ABC, how much facility-level overhead is assigned to the current order for Men's Razors?

Question

Quizplus · Accepted Answer

Using ABC cost allocation method, the facility-level overhead cost is allocated based on the number of setups performed on the machines. The total number of setups for the current order for Men's Razors is 4.

Therefore, the facility-level overhead cost assigned to the current order is calculated as follows:

Facility-level overhead cost = Facility-level overhead rate x Number of setups

Facility-level overhead rate = Total facility-level overhead cost / Total number of setups 
                               = $9,620 / 70

Facility-level overhead cost = $137.43 x 4 
                              = $549.72

However, the question only asks for the facility-level overhead cost assigned to the current order for Men's Razors. Therefore, we need to divide the total facility-level overhead cost by the total number of men's razors, and then multiply by the number of men's razors in the current order.

Facility-level overhead cost per unit of Men's Razor = Total facility-level overhead cost / Total number of Men's Razors 
                                                                     = $9,620 / 2,000 
                                                                     = $4.81

Facility-level overhead cost assigned to the current order for Men's Razors = Facility-level overhead cost per unit of Men's Razor x Number of Men's Razors in the current order 
                                                                                                                                                                              = $4.81 x 1,200 
                                                                                                                                                                              = $5,772

Therefore, the correct answer is C) $708.50.

Shaver Co Manufactures a Variety of Electric Razors for Men and and Women