Question: The Bouncy Baby Crib Mattress Company sells firm and extra firm

The Bouncy Baby Crib Mattress Company sells firm and extra-firm mattresses. The company’s president, Anna Greer, has become interested in the possibility of improving company performance by more closely monitoring overhead costs. She has decided to adopt an activity-based costing system for the current year. Last year, the company incurred $2,000,000 in overhead costs related to the following activities:

During the year, 100,000 parts were handled (75,000 for firm mattresses and 25,000 for extra-firm mattresses), 20,000 firmness tests were conducted (12,500 for firm and 7,500 for extra-firm), and 10,000 customer calls were answered (7,500 for firm and 2,500 for extra-firm).

A. Based on an activity-based approach, determine the total amount of overhead that should be assigned to firm and extra-firm mattresses.
B. If a firm mattress requires five parts, two tests, and one customer call, then what amount of overhead should be assigned to thatmattress?

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  • CreatedMarch 11, 2015
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