ABC Practice Problems with Solutions - Barnes Corporation...

Barnes Corporation manufactures two models of office chairs, a standard and a deluxe model.
The following activity and cost information has been compiled:
Number of Number of Number of
Product Setups Components Direct Labor Hours
Standard 22 8 375
Deluxe 28 12 225
Overhead costs $20,000 $40,000
Assume a traditional costing system applies the $60,000 of overhead costs based on direct labor
hours. What is the total amount of overhead costs assigned to the standard model?
A) $24,800
B) $35,200
C) $37,500
D) $22,500
Answer:
Explanation: C) [$60,000 / (375 + 225)] × 375 = $37,500
C
Assume a traditional costing system applies the $60,000 of overhead costs based on direct labor
hours. What is the total amount of overhead costs assigned to the deluxe model?
D
Number of setups and number of components are identified as activity-cost drivers for overhead.
Assuming an activity-based costing system is used, what is the total amount of overhead costs
assigned to the standard model?
A