Question
Carlton's Kitchen's three cost pools and overhead estimates are as follows: Estimated Use per Use per Activity Cost Pool Cost Driver Overhead Product A
Carlton's Kitchen's three cost pools and overhead estimates are as follows: Estimated Use per Use per Activity Cost Pool Cost Driver Overhead Product A Product B Machine Setups Setups $150,000 6,000 4,000 Assembly Number of Parts Machine Maintenance Machine Hours 69,000 100,000 24,000 13,000 45,000 37,000 Compare the overhead allocation using (A) the traditional allocation method and (B) the activity-based costing method. (Hint: the traditional method uses machine he as the allocation base.) For those boxes in which you must enter subtractive or negative numbers use a minus sign. Total Overhead (ABC) Total overhead (traditional) Difference Product A Product B 140,000 V 179,000 Feedback Check My Work A. Determine the total estimated overhead by adding up the costs. Determine the predetermined overhead rate by dividing that amount by the sum of use amounts for each product. This rate is then multiplied by the use amounts for each product to determine the estimated allocation of overhead for each product. B. Divide the total activity into the total estimated overhead for each pool to determine the per unit rates. These amounts are then multiplied by the corresponding use amounts for each pool to determine the overhead amounts. All three pools are added to determine the total overhead following activity based costing (ABC).
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