Horgen Corporation manufactures two products: Product M68B and Product H27T. The company is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products M68B and H27T.

Activity Cost Pool Activity Measure Total Cost Total Activity

Machining Machine-hours $299,000 13,000 MHs

Machine setups Number of setups $240,000 400 setups

Product design Number of products $80,000 2 products

Order size Direct labor-hours $290,000 10,000 DLHs

Activity Measure Product Product

Machine-hours M68B H27T

Number of setups 6,000 7,000

Number of products 250 150

Direct labor-hours 4,000 6,000

Using the ABC system, how much total manufacturing overhead cost would be assigned to Product H27T?

a. $291,000

b. $174,000

c. S465,000

d. $454,500

Question

Business

Macias

29 October, 09:57

Horgen Corporation manufactures two products: Product M68B and Product H27T. The company is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products M68B and H27T.

Activity Cost Pool Activity Measure Total Cost Total Activity

Machining Machine-hours $299,000 13,000 MHs

Machine setups Number of setups $240,000 400 setups

Product design Number of products $80,000 2 products

Order size Direct labor-hours $290,000 10,000 DLHs

Activity Measure Product Product

Machine-hours M68B H27T

Number of setups 6,000 7,000

Number of products 250 150

Direct labor-hours 4,000 6,000

Using the ABC system, how much total manufacturing overhead cost would be assigned to Product H27T?

a. $291,000

b. $174,000

c. S465,000

d. $454,500

+2

Answers (1)

Know the Answer?

Leon House · Answer 1

Answer: $465,000

Explanation:

The activity-based costing (ABC) is used to know the total cost of activities that is vital to make a product. In ABC system, for every activity which goes into production, a cost will be assigned.

Based on the figures in the question, the following can be deduced:

Machining:

= 299,000/13,000 * 7,000

= 23 * 7,000

= $161,000

Machine set up:

= 240,000/400 * 150

= 600 * 150

= $90000

Product design:

= 80,000/2

= $40,000

Order size:

= 290,000/10,000 * 6,000

= 29 * 6,000

= $174,000

Total = $161,000 + $90,000 + $40,000 + $174,000

= $465,000

The total manufacturing overhead cost that would be assigned to Product H27T is $465,000.