Rocoe Company Produces a Variety of Garden Tools in a Highly

question 117

Multiple Choice

Rocoe Company produces a variety of garden tools in a highly automated manufacturing facility. The costs and cost drivers associated with four activity cost pools are given below: Production of 10,000 units of a hand-held tiller required 1,000 labor hours, 80 setups, and consumed 25% of the product sustaining activities. Assuming the company uses activity-based costing, how much total overhead will be allocated to this tool?
$\begin{array}{|l|c|c|c|c|}\hline \text { Activities: } & \text { Unit Level } & \text { Batch Level } & \text { Product Level } & \text { Facility Level } \\\hline \text { Total cost } &\$ 30,000 & \$12,000 &\$ 6,000 & \$36,000 \\\hline \text { Total cost driver volume } & \text { 5,000 labor hours } & 240 \text { set ups } & \% \text { of use } & 36,000 \text { units } \\\hline\end{array}$

• A)$84,000
• B)$26,000
• C)$21,500
• D)$11,500

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Definitions:

Equity Financing

Funding a company by selling ownership shares in the company, thereby diluting ownership but not incurring debt.

Funding Source

The origin of funds used for financing a project, acquisition, or investment, which can include debt, equity, or grants.

Flotation Costs

The costs that are incurred by a company when it issues new securities, including underwriting fees, legal fees, and registration fees.

Pure Play Approach

An investment strategy focusing on companies that specialize in a specific industry sector or product, minimizing diversification to capitalize on sector strengths.