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Assigning Overhead Allocation

Rosedale Co. incurs $160,000 of overhead costs in 3 depts. as follows:

Setup $10,000 40 setups per year
Machining $110,000 5,000 hrs per year
Packing 40,000 500 orders per year

Product one Product two
setups = 20 setups = 20
machining hrs = 1,000 machining hrs = 4,000
orders packed = 150 orders packed = 350

I would like help figuring out using ABC how much overhead is assigned to Product One each year.
Thanks.

Solution Preview

The first step is to calculate the activity rate.
Activity rate = Total cost/Total activity
Setup $10,000 40 setups per year

Activity rate = 10,000/40 = $250 per ...

Solution Summary

The solution explains how to calculate the amount of overhead to be assigned using activity based costing

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