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  3. activity overhead costs cost driver product a prod

Activity Overhead Costs Cost Driver Product A Product B Total Production $50,000 Number...

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Accounting

Activity Overhead Costs Cost Driver Product A Product B Total
Production $50,000 Number of set ups 10 15 25
Materials $15,000 Number of parts 18 36 54
Packaging $30,000 Number of units shipped 45,000 75,000 120,000
Total $95,000

reclite inc produces headlamps for campers, hikers, and other people who want the convenience of a light at night without carrying a flashlight. it currently allocates overhead costs using direct labor hours, but the controller has recommended an activity based costing system using the following data.

1. Compute the amount of overhead to be allocated to each product under activity based costing.

2. Compute the amount of overhead to be allocated to each product using direct labor hours as the allocation base. Assume that the number of direct labor hours required to assemble each unit is 0.5 hours per unit for Product A and 1.0 hour per unit for Product B. The company produced 45,000 untis of Product A and 75,000 units of Product B.

3. Should the company follow the controllers recommendation? Support your answer.

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