Canterra Co Using ABC, How Much Overhead Is Assigned to Product Two

question 21

Multiple Choice

Canterra Co.incurs $160,000 of overhead costs each year in its three main departments, setup ($10,000) , machining ($110,000) , and packing ($40,000) .The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year.Information about Canterra's 2 products is as follows: $\begin{array}{lll}& \underline{\text { Product One }}& \underline{\text {Product Two }}\\\text { Number of setups } & 20 & 20 \\\text { Machining hours } & 1,000 & 4,000 \\\text { Orders packed } & 150 & 350 \\\text { Number of product } & &\\\text { Manu?fartured }&600&400\end{array}$ Using ABC, how much overhead is assigned to Product Two each year?

• A)$80,000
• B)$64,000
• C)$121,000
• D)$128,000

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Definitions:

Traceable

Refers to costs or expenses directly linked to a specific department, product, or activity, allowing for accurate financial analysis.

Department

A specialized functional area within an organization that focuses on specific operations or responsibilities.

Net Income

The total profit of a company after all expenses, including taxes and costs, have been deducted from total revenue, indicating the company's profitability.

Expenses

Costs incurred in the process of generating revenue, representing the value of resources used up or consumed.