A Company Incurs $3,600,000 of Overhead Each Year in Three

question 131

Multiple Choice

A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge. The following data are available: $\begin{array}{lcr}\text { Department }&\text {Expected Use of Driver}&\text { Cost }\\\text { Processing } & 800 & \$ 1,500,000 \\\text { Packaging } & 200,000 & 1,500,000 \\\text { Testing } & 2,000 & 600,000\end{array}$

$\text { Production information for the two products is as follows: }$

$\begin{array}{lcc}&\text {Oil }&\text {Sludge }\\\text { Department}&\text { Expected Use of Driver}&\text { Expected Use of Driver }\\\hline\text { Processing } & 300 & 500 \\\text { Packaging } & 120,000 & 80,000 \\\text { Testing } & 1,600 & 400\end{array}$ The amount of overhead assigned to Sludge using ABC is

• A) $1,800,000.
• B) $1,657,500.
• C) $1,942,500.
• D) $1,380,000.

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