Motorola Corporation manufactures cell phones and pagers in a particular factory. Assume that overhead costs are currently allocated using direct labor hours, but the controller has recommended an activity-based costing system using the following data:

a. Compute the amount of overhead allocated to each of the products under activity-based costing.
b. Compute the amount of overhead to be allocated to each product using labor hours as the allocation base. Assume 60,000 labor hours were used to assemble cell phones and
20,000 labor hours were used to assemble pagers.
c. Should the company adopt an ABCsystem?

Transcribed Image Text:

Activity Level Activity Cost Driver Cost $100,000 20,000 160,000 $280,000 Cell Phones Pagers Production Setup Material Handling and Requisition Packaging and Shipping Number of Setups Number of Parts Number of Units Shipped 12 70 120,000 30 40,000 Total Overhead