Cleveland Choppers manufactures two types of motorcycles,a Base and a Loaded model.The following activity and costs have been gathered: The number of components and number of setups are chosen as activity-cost drivers for overhead.Assuming an ABC costing system is being used.
-What is the total overhead cost assigned to the Loaded model?

Question

Quizplus · Accepted Answer

Using the ABC costing system, we can calculate the cost per activity for each product:

Base Model Cost/Component = $15 / 2 = $7.50
Loaded Model Cost/Component = $20 / 4 = $5.00

Base Model Cost/Set Up = $5,000 / 40 = $125
Loaded Model Cost/Set Up = $10,000 / 20 = $500

Using these activity costs, we can calculate the total overhead cost for the Loaded model:
Total overhead cost = (Number of components x Cost per component) + (Number of setups x Cost per setup)
Total overhead cost = (8,000 x $5.00) + (60 x $500)
Total overhead cost = $40,000 + $30,000
Total overhead cost = $70,000

Therefore, the total overhead cost assigned to the Loaded model is $31,875 ($70,000 x 45% = $31,875).

Cleveland Choppers Manufactures Two Types of Motorcycles,a Base and a Loaded