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Isadore's Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended
Isadore's Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based costing system using the following data: Cost Driver Volume Pencils Pens 16 31 Activity Setting up Inspecting Packing and shipping Total overhead Cost Driver Number of setups Number of parts Number of boxes shipped Cost $ 84,600 30,800 60,000 $175,400 _ 40,000 80,000 Required: a. Compute the amount of overhead to be allocated to each product under activity-based costing. be allocated to each product using labor-hours as the allocation base. Assume that the numb of labor-hours required to assemble each box is 0.2 for pencils and 0.2 for pens and that 40,000 boxes of pencils and 80,000 boxes pens were produced during the period
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