Allure Company Manufactures and Distributes Two Products, M and XY

question 132

Multiple Choice

Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information:
$$\begin{array} { l l r r r } \text { Activity } & \text { Cost Driver } & \text { Amount } & { \text { M } } & { \text { XY } } \\\text { Production setups } & \text { Number of setups } &8 2 , 0 0 0 &8 & 12 \\\text { Material hardling } & \text { Number of parts } & 48,000 & 56 & 24 \\\text { Packaging costs } & \text { Number of urits } & 130,000 & 80,000 & 50,000 \\& &\$ 2 6 0 , 0 0 0 & &\end{array}$$
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What is the total overhead per unit allocated to Product XY using activity-based costing (ABC) ?

• A) $2.60.
• B) $2.27.
• C) $2.00.
• D) $1.83.

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Definitions:

Confidence Interval

A range of values, derived from the sample statistics, that is likely to contain the value of an unknown population parameter.

Normally Distributed

A type of distribution in which data is symmetrically distributed around the mean, forming a bell-shaped curve.

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values, indicating how much the individual data points differ from the mean.

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