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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.

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Answers (1)
  1. 31 July, 06:04
    0
    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
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