Carl Company manufacture two products, Product X and Product Y. Currently, direct labour hours are used to allocate overhead cost to the two products. Key details relating to the product are as follows.

	Product X	Product Y
Production Volume (units)	10,000	10,000
	Per unit	Per unit
Direct material cost	$20	$20
Direct labour cost	$10	$40
Direct labour hours	1	4

Overheads of $1,000,000 can be traced to the following activities: order processing ($200,000), machine related ($300,000) and product inspection ($500,000) Key data realting to the activities are as follows:

	Order Processed	Machine Hours	Inspection Hours
Product X	400	6,000	800
Product y	400	4,000	200

1. Calculate the total overhead cost assigned to Product X under the current system.
2. Calculate the total overhead cost for Product X if the company implements activity-based costing.
3. Using the cost computed above, explain which approach would provide more accurate information on the costs to manufacture products.

Answer rating: 100% (QA)

Part A total overhead cost assigned to Product X under the current system 200000 Predetermined overh... View the full answer