Mcnamee Corporation's activity-based costing system has three activity cost pools--Fabricating, Setting Up, and Other. Costs in the Fabricating cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. The activity rate for Fabricating is $0.14 per MH; the activity rate for Setting Up is $3.30 per batch. The following table shows the machine-hours and number of batches associated with each of the company's two products: MHsBatchesProduct O02,800200Product O117,2001,800Total20,0002,000Required:Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
What will be an ideal response?
Overhead cost for Product O0:
Activity Rate | Activity | ABC Cost | |||||
| Fabricating | $ | 0.14 | per MH | 2,800 | MHs | $ | 392 |
| Setting up | $ | 3.30 | per batch | 200 | batches | 660 | |
| Total | $ | 1,052 | |||||
Activity Rate | Activity | ABC Cost | |||||
| Fabricating | $ | 0.14 | per MH | 17,200 | MHs | $ | 2,408 |
| Setting up | $ | 3.30 | per batch | 1,800 | batches | 5,940 | |
| Total | $ | 8,348 | |||||
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