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: CostTitaniumAluminumTotal Cost Assembly500 mach. Hours500 mach. Hours44000Inspections35015084000  2100 labor hours1900 labor hours  Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing. Using activity-based costing, how much assembly cost is assigned to titanium racquets?

Question
Asked Mar 25, 2019
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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

Titanium

Aluminum

Total Cost

 

Assembly

500 mach. Hours

500 mach. Hours

44000

Inspections

350

150

84000

 

 

2100 labor hours

1900 labor hours

 

 

Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing. Using activity-based costing, how much assembly cost is assigned to titanium racquets?

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Expert Answer

Step 1

Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs based on machine hours. Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are demanding the activities

Step 2

Computation of Overhead Rate:

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Step 3

Assembly Cost assigned to Titanium ...

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Accounting

Activity Based Costing

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