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Assume a company produces and sells only two products-14.000 units of Product A and 6,000 units of Product 8. The selling prices are $65 per
Assume a company produces and sells only two products-14.000 units of Product A and 6,000 units of Product 8. The selling prices are $65 per unit for Product A and $96 per unit for Product B. Product As direct materials and direct labor costs per unit are $30 and $12, respectively. Product B's direct materials and direct labor costs per unit are $34 and $15, respectively. The company uses a plantwide overhead rate based on direct labor dollars. It is considering implementing an activity based costing (ABC) system that allocates all of its manufacturing overhead to three cost pools. The following additional information is available for the company as a whole and for Products A and B Activity Cost Pool Machining Machine setups Product design Activity Measure Machine-hours Number of setups Number of products Estimated Overhead Cost $ 300,000 $ 150,000 $ 80,000 Expected Activity 15,800 MH 200 Setups 2 Products Activity Measure Machine-hours Number of setups Number of products Product A 9,000 50 1 Product B 6,000 150 1 Using the company's plantwide approach, the total overhead cost allocated to Product B is closest to PUU Using the company's plantwide approach, the total overhead cost allocated to Product B is closest to Multiple Choice $214,500 $134,500 $154,500 $184,500
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