An activity based costing system is being considered at Evelia, nv to assign products overhead costs; these overhead costs are currently assigned strictly by number of units produced. First, the two overhead costs of Rent expense and Insurance expense would be allocated to three activity cost pools - Finishing, Sanding, and Other - based on resource consumption. The information used to perform these allocations is below:

Overhead Costs:

• Rent expense: $2,000,000
• Insurance expense: $1,650,000

Distribution of Resource Consumption across Activity Cost Pools:Overhead CostActivity Cost PoolsFinishingSandingOtherRent expense0.450.250.30Insurance expense0.200.350.45In the second stage, Finishing costs would be assigned to products using direct labor hours and Sanding costs would be assigned to products using the number of machine hours. The costs in the Other activity pool would not be assigned to products. Activity data for the company's two products is as follows:direct labor hoursmachine hoursUnits ProducedProduct XR-2:15,00010,5006,400Product XR-1:19,00029,5002,200Total:34,00040,0008,600

PART A:

How much overhead cost would be assigned to the Sanding activity cost pool under activity based costing in the first stage of allocation?Answer

$1,077,500

$830,000

$330,000

$977,500

$1,230,000

PART B:

The activity rate for the Sanding activity cost pool under activity based costing would be closest to:Answer

$26.94

$42.43

$9.71

$24.44

$14.44

PART C:

To the nearest dollar, how would the overhead cost assigned to Product XR-1 change under activity based costing compared to their current accounting methods?

There would beAnswer

an increase

a decrease

no change

in assigned overhead under activity based costing, and the amount of the change would be $Answer

. (Enter 0 for amount if choosing 'no change' for the direction.)