Reynoso Corporation manufactures titanium and aluminum tennis racquets. Reynoso's total overhead costs consist of assembly costs and inspection costs. The following information is available:

Cost Titaniium Aluminum Total Cost

Assembly 500 mach. hours 500 mach. hours $60,000

Inspections 350 250 $100,000

2,100 labor hours 1,900 labor hours

Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing.

Total overhead costs assigned to titanium racquets, using a single overhead rate, are

(A) $80,000.

(B) $84,000.

(C) $100,000

(D) $112,000.

Question

Business

Guest

31 July, 05:08

Reynoso Corporation manufactures titanium and aluminum tennis racquets. Reynoso's total overhead costs consist of assembly costs and inspection costs. The following information is available:

Cost Titaniium Aluminum Total Cost

Assembly 500 mach. hours 500 mach. hours $60,000

Inspections 350 250 $100,000

2,100 labor hours 1,900 labor hours

Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing.

Total overhead costs assigned to titanium racquets, using a single overhead rate, are

(A) $80,000.

(B) $84,000.

(C) $100,000

(D) $112,000.

+5

Answers (1)

Know the Answer?

Fernanda Marshall · Answer 1

Option (B) is correct.

Explanation:

The total overhead costs comprise:

= Assembly + Inspections

= $60,000 + $100,000

= $160,000

Total direct labor (DL) hours:

= Titanium 2,100 + Aluminium 1,900

= 4,000 hours.

Overhead based on DL hours:

= (Total overhead * Number of DL hours for Titanium) : Total number of DL hours

= ($160,000 * 2,100) : 4,000

= $84,000