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    Assigning Overhead Allocation

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    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.

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    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