Rocoe Company produces a variety of garden tools in a highly automated manufacturing facility. The costs and cost drivers associated with four activity cost pools are given below: Production of 10,000 units of a hand-held tiller required 1,000 labor hours, 80 setups, and consumed 25% of the product sustaining activities. Assuming the company uses activity-based costing, how much total overhead will be allocated to this tool?
$\begin{array}{|l|c|c|c|c|}
\hline \text { Activities: } & \text { Unit Level } & \text { Batch Level } & \text { Product Level } & \text { Facility Level } \
\hline \text { Total cost } &\$ 30,000 & \$12,000 &\$ 6,000 & \$36,000 \
\hline \text { Total cost driver volume } & \text { 5,000 labor hours } & 240 \text { set ups } & \% \text { of use } & 36,000 \text { units } \
\hline
\end{array}$

A)$84,000
B)$26,000
C)$21,500
D)$11,500

Question

Rocoe Company produces a variety of garden tools in a highly automated manufacturing facility. The costs and cost drivers associated with four activity cost pools are given below: Production of 10,000 units of a hand-held tiller required 1,000 labor hours, 80 setups, and consumed 25% of the product sustaining activities. Assuming the company uses activity-based costing, how much total overhead will be allocated to this tool?
$\begin{array}{|l|c|c|c|c|}
\hline \text { Activities: } & \text { Unit Level } & \text { Batch Level } & \text { Product Level } & \text { Facility Level } \
\hline \text { Total cost } &\$ 30,000 & \$12,000 &\$ 6,000 & \$36,000 \
\hline \text { Total cost driver volume } & \text { 5,000 labor hours } & 240 \text { set ups } & \% \text { of use } & 36,000 \text { units } \
\hline
\end{array}$

A)$84,000
B)$26,000
C)$21,500
D)$11,500

Quizplus · Accepted Answer

Using activity-based costing, the total overhead cost allocated to the hand-held tiller can be calculated as follows:

1. Labor pool:
Overhead rate = $270,000 ÷ 18,000 labor hours = $15 per labor hour
Allocated overhead cost = 1,000 labor hours x $15 per labor hour = $15,000

2. Setup pool:
Overhead rate = $100,000 ÷ 800 setups = $125 per setup
Allocated overhead cost = 80 setups x $125 per setup = $10,000

3. Product sustaining pool:
Overhead rate = $40,000 ÷ 1,000 units = $40 per unit
Allocated overhead cost = 10,000 units x $40 per unit x 25% = $10,000

Total allocated overhead cost = $15,000 + $10,000 + $10,000 = $35,000

Therefore, the answer is C) $21,500.

Rocoe Company Produces a Variety of Garden Tools in a Highly