Windsor Co. incurs $863625 of overhead costs each year in its three main departm

Question

Windsor Co. incurs $863625 of overhead costs each year in its three main departments, machining ($490000), inspections ($245000) and packing ($128625). The machining department works 4000 hours per year, there are 600 inspections per year, and the packing department packs 1000 orders per year. Information about Windsor’s two products is as follows:

Using ABC, how much overhead is assigned to Product X this year?

Product X Product Y Machining hours 1000 3000 Inspections 100 500 Orders packed 350 650 Direct labor hours 1700 1800

Explanation / Answer

The correct answer is $ 208,352.08

Note :

1. Activity rates:

2. Overhead Assigned

Departments Overhead Costs Activity Drivers Activity Activity Rate ( Overhead Cost / Activity) Machining 4,90,000 Hours Worked 4000 122.50 Inspections 2,45,000 Number of Inspections 600 408.33 Packing 1,28,625 Orders Packed 1000 128.63 8,63,625

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