Question
25. A company incurs $4,050,000 of overhead each year across three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works
25. A company incurs $4,050,000 of overhead each year across three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of product Basic and 600,000 drums of product Premium. The following data are available:
Activity Cost Pools Estimated Use of Driver Cost
Ordering and Receiving 2,000 $1,200,000
Mixing 50,000 1,500,000
Testing 1,500 1,350,000
Production information product Basic is as follows:
Activity Cost Pools Estimated Use of Driver
Ordering and Receiving 400
Mixing 20,000
Testing 500
If ABC is used, what amount of overhead will be assigned to Basic?
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