Answer:
The overhead cost allocated to Beta using traditional costing
Overhead allocation rate
= Budgeted overhead
Budgeted direct labour hours
= $800,000
4,000 hours
= $200 per direct labour hour
Overhead allocated to Beta
= $200 x 1,200 hours
= $240,000
The correct answer is A
2. The total overhead allocated to Zeta using traditional costing
= $200 x 2,800 hours
= $560,000
The correct answer is D
3. The total overhead allocated to Beta using activity-based costing
Direct labour hours
Cost driver rate
= $160,000
4,000 hours
= $40 per direct labour hour
Set-up
Cost driver rate
= $280,000
100
= $2,800 per set-up
Number of parts Components (PU)
Cost driver rate
= $360,000
3,000
= $120 per pc
Total overhead allocated
= $40 x 1,200 + $2,800 x 45 + $120 x 2,250
= $444,000
The correct answer is C
4. The total overhead cost allocated to Zeta using activity-based costing
= $40 x 2,800 + $2,800 x 55 + $120 x 750
= $356,000
The correct answer is B
Explanation:
In traditional costing, overhead allocation rate is total budgeted overhead ($800,000) divided by total budgeted direct labour hours (4,000 hours).
Overhead allocated to each product is calculated as overhead allocation rate multiplied by budgeted hours for each product.
In activity-based costing, cost driver rate is the estimated overhead for each cost pool divided by the total cost driver for each cost pool.
Overhead allocated to each product is the cost driver rate for each cost pool multiplied by the cost driver for each product.
