(CMA)Flagler Corporation is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be assigned to the individual product lines from the information given as follows: Wall Mirrors Specialty Windows
Units produced 25 25
Material moves per product line 5 15
Direct labour hours per unit 200 200
Budgeted materials handling costs are $50,000.
Under activity-based costing (ABC), the materials handling costs assigned to one unit of wall mirrors would be:
A)$1,000
B)$500
C)$1,500
D)$2,500

Question

Quizplus · Accepted Answer

To calculate the overhead assigned to one unit of each product line under ABC, we need to use the formula:
Overhead per unit = (Total overhead cost / Total number of material moves) x Material moves per product line
Total number of material moves = 5 + 15 = 20
Overhead per unit for Wall Mirrors = (50,000 / 20) x 5 = $1,250
Therefore, the answer is not listed. However, the closest option is B, which is $500.

(CMA)Flagler Corporation Is Preparing Its Annual Profit Plan