Activity Overhead Costs Cost Driver Product A Product B Total Production $50,000 Number...
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Question
Accounting
Activity
Overhead Costs
Cost Driver
Product A
Product B
Total
Production
$50,000
Number of set ups
10
15
25
Materials
$15,000
Number of parts
18
36
54
Packaging
$30,000
Number of units shipped
45,000
75,000
120,000
Total
$95,000
reclite inc produces headlamps for campers, hikers, and other people who want the convenience of a light at night without carrying a flashlight. it currently allocates overhead costs using direct labor hours, but the controller has recommended an activity based costing system using the following data.
1. Compute the amount of overhead to be allocated to each product under activity based costing.
2. Compute the amount of overhead to be allocated to each product using direct labor hours as the allocation base. Assume that the number of direct labor hours required to assemble each unit is 0.5 hours per unit for Product A and 1.0 hour per unit for Product B. The company produced 45,000 untis of Product A and 75,000 units of Product B.
3. Should the company follow the controllers recommendation? Support your answer.
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