Use activity-based costing to allocate overhead

Reference no: EM131068563

1.) Telecom Company would like to use activity-based costing to allocate overhead, rather than using one plant-wide rate. The company produced 6,000 cell phones (sells for $150) and 2,000 smart phones (sells for S350). The following estimates are for the activities and related cost drivers identified as having the greatest impact on overhead costs

		Estimated	Estimated Cost Driver Activity
		Overhead	Cell	Smart	Total
Activity	Cost Driver	Costs	Phone	Phone
	Number of
Production runs	production runs	$200,000	20	5	25
Quality inspections	Inspection hrs	150,000	600	1,400	2000
Packaging Dept	# of units shipped	200 000	6,000	2,000	8000
Total		$550,009

Required:

a. What is the overhead cost per unit, for each type of phone?

b. Why would the company choose to use activity based costing over a predetermined OH rate?

c. What could the company use this information for?

Reference no: EM131068563

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