Clemson Co -Using ABC, How Much Overhead Is Assigned to Product X

question 13

Multiple Choice

Clemson Co.incurs $700,000 of overhead costs each year in its three main departments, machining ($400,000) , inspections ($200,000) and packing ($100,000) .The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year.Information about Clemson's two products is as follows: $$\begin{array} { l c c } & \text { Product X } & \text { Product } Y \\\text { Machining hours } & 1,000 & 3,000 \\\text { Inspections } & 100 & 500 \\\text { Orders packed } & 350 & 650 \\\text { Direct labor hours } & 1,700 & 1,800\end{array}$$
-Using ABC, how much overhead is assigned to Product X this year?

• A)$168,334
• B)$242,308
• C)$340,000
• D)$350,000

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Definitions:

Costs Percentage

The proportion of costs (operational, production, etc.) relative to some base measure, such as sales.

Fixed Assets

Long-term tangible property or equipment that a company owns and uses in its operations to generate income.

Operating Capacity

The maximum output a company can produce under normal conditions.

Sales Increase

An uptick in the volume or value of products or services sold by a business over a given period.