Boswell Company manufactures two products Regular and Suprem

Boswell Company manufactures two products, Regular and Supreme. Boswell’s overhead costs consist of machining, $1200000; and assembling, $600000. Information on the two products is:What is the activity-based costing for regular.

                             Regular Supreme

Direct labor hours   10000   15000

Machine Hours        10000   30000

Number of Parts      90000   160000

Solution

Overhead rate/machine hour=$1200000/(10000+30000)=$30

Overhead rate/part=$600000/(90,000+160,000)=$2.4

Hence activity-based costing for regular=(10000*30)+(90,000*2.4)

which is equal to

=$516000.