Asked by Richard Sullivan on May 20, 2024
Verified
Weissman Corporation manufactures two products: Product E16S and Product P17K. 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 E16S and P17K. Using the ABC system, the percentage of the total overhead cost that is assigned to Product E16S is closest to:
A) 52.24%
B) 42.16%
C) 10.07%
D) 50.00%
Activity-Based Costing
This costing method assigns overhead and indirect costs to specific activities, thus providing a more accurate reflection of the costs associated with producing specific products or services.
Manufacturing Overhead
All manufacturing costs that are not directly associated with the production of a product, including indirect materials, indirect labor, and other expenses such as depreciation and maintenance.
- Ascertain the percentage of overall overhead expenditure apportioned to specific items using data from Activity-Based Costing (ABC).
Verified Answer
Product E16S = $1,656,000 (cost pool 1) + $2,080,000 (cost pool 2) + $960,000 (cost pool 3) + $1,024,000 (cost pool 4) = $5,720,000
Product P17K = $2,352,000 (cost pool 1) + $1,760,000 (cost pool 2) + $1,040,000 (cost pool 3) + $640,000 (cost pool 4) = $5,792,000
The percentage of total overhead cost assigned to Product E16S can be calculated as:
($5,720,000 / ($5,720,000 + $5,792,000)) x 100% = 49.74% (rounded to two decimal places)
Therefore, the closest answer choice is A) 52.24%, which is the percentage of total overhead cost assigned to Product P17K.
Learning Objectives
- Ascertain the percentage of overall overhead expenditure apportioned to specific items using data from Activity-Based Costing (ABC).
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