Isadore’s Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based costing system using the following data: Cost Driver Volume Activity Cost Driver Cost Pencils Pens Setting up Number of setups $ 96,900 22 29 Inspecting Number of parts 32,000 4 6 Packing and shipping Number of boxes shipped 46,000 50,000 65,000 Total overhead $ 174,900 

Required: 

a. Compute the amount of overhead to be allocated to each product under activity-based costing. 

b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number of labor-hours required to assemble each box is 0.1 for pencils and 0.2 for pens and that 50,000 boxes of pencils and 65,000 boxes of pens were produced during the period.

Answer rating: 100% (QA)

a The amount of overhead to be allocated to each product under activitybased costing is as follows ... View the full answer