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Question
A company has two products: A and B. It uses a plantwide overhead allocation method based on activity 2 and has prepared the following analysis showing budgeted costs and activities. Use this information to compute (a) the companys plantwide overhead rate and (b) the amount of overhead allocated to Product A.
| Activity Cost Pool | Budgeted Overhead Cost | Budgeted Activity | ||
| Product A | Product B | Total | ||
| Activity 1 | $160,000 | 400 | 1,600 | 2,000 |
| Activity 2 | $110,000 | 2,000 | 1,000 | 3,000 |
| Activity 3 | $180,000 | 1,200 | 10,800 | 12,000 |
| Total budgeted overhead | $450,000 | |||
Answer
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