Reference no: EM132509405

iRobot wants to reallocate the existing overhead costs to products using recently collected information with respect to key activities and activity cost drivers. They have the following three activities and other information

Total Activity

Activity Costs                                 Costs (000's)

Assembling Components                      $36,000

Setup Production Line                         $15,000

Repair Machines                                 $7,000

Additional Information about Production

Total

Roomba                                                 690

Roomba                                                  614

Number of Production Runs                       1,000

750             250

Number of Setup Hours                           8,000        5,000          3,000

Number of Machine Hours                      35,000            25,000          10,000

Number of Hourly Employees                     160               40                 120

Apple has learned the following:

1. The cost of assembling components is incurred each time a new production run occurs. The cost seems unrelated to the number of components within each batch.
2. The cost of setting up the machine varies depending on the product and specific production run. The cost seems to relate to the time it takes to setup the machine
3.  iRobot has to repair the machines routinely based on the hours that the machine is being used.

Question 1: Compute the amount of overhead cost allocated to each product and the profitability of each product using the activity based costing approach.