Windsor Co. incur $1067500 of overhead costs each year in its three main departments, machining ($610000), inspections ($305000) and packing ($152500). The machining department works 4000 hours per year, there are 500 inspections per year, and the packing department packs 1000 orders per year. Information about Windsor’s two products is as follows: Product XProduct YMachining hours10003000Inspections100400Orders packed350650Direct labor hours17001800Using ABC, how much overhead is assigned to Product X this year?

Question
Asked Mar 25, 2019

Windsor Co. incur $1067500 of overhead costs each year in its three main departments, machining ($610000), inspections ($305000) and packing ($152500). The machining department works 4000 hours per year, there are 500 inspections per year, and the packing department packs 1000 orders per year. Information about Windsor’s two products is as follows:

 

Product X

Product Y

Machining hours

1000

3000

Inspections

100

400

Orders packed

350

650

Direct labor hours

1700

1800

Using ABC, how much overhead is assigned to Product X this year?

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Step 1

Calculate activity rate for each department.

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Step 2

Calculate the cost of overhead assi...

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