Louie's Music Co.produces three types of harmonicas: the junior model,the standard model and the professional model.The junior model requires 8 setups,the standard model requires 12 setups and the professional model requires 20 setups.The company expects to incur overhead costs of $28,000 where the cost driver is machine setups.How much overhead is assigned to each product?

Question

Quizplus · Accepted Answer

C)Total set-ups = 8 + 12 + 20 = 40
Overhead allocation rate = $28,000/40 = $700
Junior Model = 8 × $700 = $5,600
Standard Model = 12 × $700 = $8,400
Professional Model = 20 × $700 = $14,000