Zipp Company manufactures two products (X and Y). The overhead costs (£84,000) have been divided into three cost pools that use the following activity cost drivers: What is the allocation rate per setup using activity-based costing?

A) £900
B) £450
C) £9,000
D) £2,100

Question

Zipp Company manufactures two products (X and Y) . The overhead costs (£84,000) have been divided into three cost pools that use the following activity cost drivers: What is the allocation rate per setup using activity-based costing?

A) £900 
B) £450 
C) £9,000 
D) £2,100

Quizplus · Accepted Answer

The allocation rate per setup for activity-based costing can be calculated by dividing the total overhead cost for the setup cost pool (£28,000) by the total number of setups (62). 
Allocation rate per setup = £28,000/62 = £450. Therefore, B is the correct answer.

Zipp Company Manufactures Two Products (X and Y)