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Question - The Bed Company manufactures bed frames. It has two products, Standard and Elite with total overhead of $625,000. The company plans to manufacture 195 Standard bed frames and 290 Elite bed frames this year. In manufacturing the bed frames, the company must perform 700 set ups for the Standard and 300 for the Elite; it processes 114 purchase orders for the Standard and 90 for the Elite; and the company's employees work 2,800 direct labour hours on the Standard product and 3,500 on the Elite. The total set up costs are $300,000 and the total purchasing order costs are $204,000.
Calculate the overhead costs that would be assigned to the Elite product using activity based costing. Explain the benefits of activity based costing.
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