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Homework answers / question archive / When working on the problems below REMEMBER overhead rate for each activity is the total cost of the activity divided by the TOTAL amount of the activity
When working on the problems below REMEMBER overhead rate for each activity is the total cost of the activity divided by the TOTAL amount of the activity. So, activity 1 is TOTAL OVERHEAD COST/TOTAL ACTIVITY Total activity is 400 + 1.600 +2,000 Alta company has two products: A and B. It uses activity-based costing and has prepared the following analysis showing budgeted costs and activities. Use this information to compute (a) the company's overhead rates for each of the three activities and (b) the amount of overhead allocated to Product A. Activity Cost Pool Activity 1 Activity 2 Activity 3 Budgeted Overhead Cost $160,000 $110,000 $180,000 Budgeted Activity Product A Product B Total 400 1,600 2,000 2,000 1,000 3,000 1,200 10.800 12,000 $450,000 Total budgeted overhead
1.The company's overhead rates for each of three activities
Activity 1 = Budgeted overhead cost for activtiy 1/Total activity
OH rate = $160000/2000 = 80
Activityv2= Budgeted OH cost for activity 2/Total activity
= $110000/3000= 36.66
Activity 3=Budgeted OH cost for activity 3/Total acitvity
=$180000/12000= 15
2.Amount of OH allocated to product A
Activty 1= OH rate of activity 1*Budgeted activity 1 of product A
=80*400= $32000
Activity 2=OH rate of activity 2*Budgeted activity 2 of product A
=36.66*2000
=$73,320
Activity 3=OH rate of activity 3*Budgeted activity 3of product A
=15*1200
=$18000
