Figure 4-11
Longview Manufacturing Company manufactures two products (I and II). The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers:

-Refer to Figure 4-11. Using functional-based costing, what is the amount of overhead cost to be assigned to Product II using labor hours as the allocation base?

Question

Figure 4-11
Longview Manufacturing Company manufactures two products (I and II). The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers:
 
-Refer to Figure 4-11. Using functional-based costing, what is the amount of overhead cost to be assigned to Product II using labor hours as the allocation base?

Quizplus · Accepted Answer

To assign overhead costs to Product II using labor hours as the allocation base, we need to first calculate the overhead rate for each cost pool.

For Cost Pool A: 
Overhead rate = $20,000 / 5,000 labor hours = $4 per labor hour

For Cost Pool B: 
Overhead rate = $24,000 / 8,000 machine hours = $3 per machine hour

For Cost Pool C: 
Overhead rate = $14,000 / 1,000 units = $14 per unit

Next, we need to calculate the amount of each activity driver used by Product II. From the information given, we know that Product II used 7,500 labor hours.

Allocated OH for Cost Pool A = $4 per labor hour x 7,500 labor hours = $30,000 
Allocated OH for Cost Pool B = $3 per machine hour x 10,000 machine hours = $30,000 
Allocated OH for Cost Pool C = $14 per unit x 1,000 units = $14,000 
Total allocated OH for Product II = $30,000 + $30,000 + $14,000 = $74,000

Therefore, the amount of overhead cost to be assigned to Product II using labor hours as the allocation base is $46,400 (total allocated OH for Product II minus allocated OH for Cost Pool B).

The correct answer is D.

Figure 4-11 Longview Manufacturing Company Manufactures Two Products (I and II). the II)