Part B The Bridgewater Company currently allocates overhead to all its products

Question

Part B The Bridgewater Company currently allocates overhead to all its products using an overhead rate of $20 per machine hour. The company is thinking of switching to activity based costing, ABC The cost accountant has already chosen the cost drivers and estimated the cost drivers rates: Activity Cost driver Cost driver rate Handling materials Pounds of materials handled $32 per pound Setting up machines Number of production runs S1,500 per production run $10 per machine hour Running machines Machine hours The following information pertains to Product J. Bridgewater purchased and used 1,000 pounds of direct materials at $40 per pound to make 500 units. There were 30 production runs using a total of 4,800 machine hours. Each unit required 2 hours of direct labor at $60 per hour Required A. The total overhead allocated to Product J using the current system is B. The total overhead allocated to Product J under ABC costing is C. The product cost per unit of Product J under ABC costing is

Explanation / Answer

A) total overhead allocation to product J using the current system is 20*4800 96000 B) overhead allocated under current system Handling materials (1000*32)= 32000 Setting up machines (1500*30)= 45000 Running machines (10*4800)= 48000 total overhead allocated 125000 answer c) product costper unit direct materials (1000*40) 40000 Direct labor (500*2*60)= 60000 overhead allocated 125000 total cost 225000 total units produced 500 cost per unit 450 answer

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