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Horngren'S Financial And Managerial Accounting
Found in: Page 1042

Short Answer

Question: Newton Company has analyzed its production process and identified two primary activities. These activities, their allocation bases, and their estimated costs are listed below.


Allocation Base

Estimated Activity

Estimated Costs


Number of purchase orders

200 purchase orders

$ 10,000

Materials Handling

Number of parts

15,000 parts

$ 7,500

The company manufactures two products: Regular and Super. The products use the following resources in March:

Regular Super

Number of purchase orders 5 purchase orders 7 purchase orders

Number of parts 600 parts 750 parts

5. Compute the predetermined overhead allocation rates using activity-based costing.

6. Determine the amount of overhead allocated to Regular products in March.

7. Determine the amount of overhead allocated to Super products in March.

Predetermined overhead allocation rate

For Purchasing cost:$50

For Material handling cost:$0.5

Overhead cost for Regular Product:$550

Overhead cost for Super Product:$725

See the step by step solution

Step by Step Solution

Step-by-Step-SolutionStep1: Computation of predetermined overhead allocation rate

Step 2: Overhead cost for regular product

Step 3: Overhead cost for super product

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