Berg Company incurs 320000 overhead costs each year in its t

Berg Company incurs $320,000 overhead costs each year in its three main departments, setup ($20,000), machining($220,000), and packing ($80,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department pcks 500 orders per year. Information about Berg\'s two products lis as follows: Number of setups Machining hours Orders packed Number of products manufactured Product A1 20 ,000 150 600 Product B1 20 4,000 350 400 Using ABC, how much overhead is assigned to Product Ai each year? $102,000 O $64,000 $242,000 O $160,000

Solution

Answer:

Setups Cost allocated to Product A1 = 20 / 40 * $20,000 = $10,000
Machining Cost allocated to Product A1 = 1,000 / 5,000 * $220,000 = $44,000
Packing Cost allocated to Product A1 = 150 / 500 * $80,000 = $24,000

Total Overhead cost assigned to Product A1 = $10,000 + $44,000 + $24,000
Total Overhead cost assigned to Product A1 = $78,000