Question

tent master produces pup tents and pop - up tents. the company budgets $252,000 of overhead cost and 42,000 direct labor hours. additional information follows.
activity budgeted cost activity cost driver budgeted activity usage
assembly $168,000 direct labor hours (dlh) 42,000
electricity 24,000 machine hours (mh) 10,000
materials purchasing 60,000 purchase orders (po) 400
total $252,000
the following actual activity usage produced 10,000 pup tents and 6,000 pop - up tents.
activity usage
activity cost driver pup tents pop - up tents
direct labor hours (dlh) 30,000 12,000
machine hours (mh) 4,000 6,000
purchase orders (po) 150 250
which of the following statements is false?
a. activity rate for assembly activity using activity - based costing is $4.
b. activity rate for electricity activity using activity - based costing is $2.4.
c. activity rate for materials purchasing activity using activity - based costing is $150.
d. the total overhead cost allocated to pup tent is $99,900. the total overhead cost allocated to pop - up tent is $152,100.

Explanation:

Step1: Calculate assembly activity rate

Activity rate = $\frac{Budgeted\ cost}{Budgeted\ activity\ usage}$. For assembly, $\frac{168000}{42000}=4$.

Step2: Calculate electricity activity rate

For electricity, $\frac{24000}{10000}=2.4$.

Step3: Calculate materials - purchasing activity rate

For materials - purchasing, $\frac{60000}{400}=150$.

Step4: Calculate overhead cost allocated to Pup tent

Assembly cost for Pup tent: $4\times30000 = 120000$. Electricity cost for Pup tent: $2.4\times4000=9600$. Materials - purchasing cost for Pup tent: $150\times150 = 22500$. Total for Pup tent: $120000 + 9600+22500=152100$.

Step5: Calculate overhead cost allocated to Pop - up tent

Assembly cost for Pop - up tent: $4\times12000 = 48000$. Electricity cost for Pop - up tent: $2.4\times6000 = 14400$. Materials - purchasing cost for Pop - up tent: $150\times250=37500$. Total for Pop - up tent: $48000+14400 + 37500=100000 - 1=99900$.

Answer:

D. The total overhead cost allocated to Pup tent is $99,900. The total overhead cost allocated to Pop - up tent is $152,100.