St James, Inc The Overhead Cost Allocated to Beta by Using Traditional Costing

question 29

Multiple Choice

St. James, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labour hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labour hours (DLH) , production setups (SU) , and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow. $\begin{array} { | c | c | c | c | } \hline \text { Product } & \begin{array} { c } \text { Pool No. 1 } \\\text { (Driver: DLH) }\end{array} & \begin{array} { c } \text { Pool No. 2 } \\\text { (Driver: SU) }\end{array} & \begin{array} { c } \text { Pool No. 3 } \\\text { (Driver: PC) }\end{array} \\\hline \text { Beta } & 1.200 & 45 & 2.250 \\\hline \text { Zeta } & 2.800 & 55 & 750 \\\hline & & & \\\hline \begin{array} { c } \text { Pool } \\\text { Cost }\end{array} & \$ 160,000 & \$ 280,000 & \$ 360,000 \\\hline\end{array}$ The overhead cost allocated to Beta by using traditional costing procedures would be:

• A)$240,000.
• B)$360,000.
• C)$440,000.
• D)$560,000.
• E)$800,000.

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Definitions:

Mental Imagery

The representation of sensory information in the mind without external input, often involving visualizing scenarios or rehearsing actions.

Natural Rewards

Benefits that spontaneously arise from performing certain activities, providing inherent satisfaction or pleasure.

Empowerment

The process of providing individuals with the resources, authority, opportunity, and motivation to achieve their work roles effectively.

Production Employees

Workers directly involved in the manufacturing or creation of products within an organization.