Assume that the Oregon Ice Cream Company is considering the costs of two of thei

Question

Assume that the Oregon Ice Cream Company is considering the costs of two of their product lines - ice cream sandwiches and dessert bars. The company identified the following partial list of activities, costs, and activity drivers expected for the next year.

Activity. Expected Costs. Cost Driver
Extrusion Costs $637,500 Number batches made
Packaging Costs $44,000 Number of units made

Products. Ice Cream Sandwiches Dessert Bars
Product volume 350,000 units 200,000 units
Batches made 400 batches 350 batches

Refer to the data above. How much overhead cost will be assigned to the desert bar product line using activity-based costing (ABC)?
340,750
$247,818
$16,000
$297,500
$313,500

Explanation / Answer

The correct answer is $313,500

Note :

Activity Expected Costs Cost Driver Total Activity Activity Rate (  Expected Costs / Total Activity ) Extrusion Costs 6,37,500 Number batches made 750 850 Packaging Costs 44,000 Number of units made 5,50,000 0.08

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