Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell’
ID: 2403228 • Letter: S
Question
Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell’s total overhead costs consist of assembly costs and inspection costs. The following information is available:
Cost Titanium Aluminum Total Cost
Assembly 500 mach. hours 500 mach. hours $45,000
Inspections 350 150 $75,000
2,100 labor hours 1,900 labor hours
Sitwell is considering switching from one overhead rate based on labor hours to activity-based costing.
Total overhead costs assigned to titanium racquets, using a single overhead rate, are
Explanation / Answer
Total overheads cost assigned to titanium racuets = $ 63,000 Workings: Total Cost Assembly = $ 45,000 Inspection = $ 75,000 Total Cost = $ 1,20,000 Total labour hours Titanium = 2,100 labour hours Aluminium = 1,900 labour hours Total labour hours = 4,000 labour hours Overhead Cost per labour hours = $1,20,000 / 4,000 labour hours = $ 30 Total overheads cost assigned to titanium racuets = 2,100 labour hours X $30 = $ 63,000