Eaker Company Uses Activity-Based Costing to Compute Product Costs for External

Essay

Eaker Company uses activity-based costing to compute product costs for external reports.The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool.Estimated costs and activities for the current year are presented below for the three activity centres:
$$\begin{array} { | l | r | r | } \hline \text { Activity Centre } & \text { Estimated Overhend Cost } & \text { Expected Activity } \\\hline \text { Batch setups } & \$ 20,400 & 1,200 \\\hline \text { Material handling } & 52,800 & 2,400 \\\hline \text { General factory } & 78,000 & 2,600 \\\hline\end{array}$$
Actual costs and activities for the current year were as follows:
$$\begin{array} { | l | r | r | } \hline \text { Activity Centre } & \text { Actual Overhead Costs } & \text { Expected Activity } \\\hline \text { Batch setups } & \$ 20,740 & 1,230 \\\hline \text { Material hardling } & 52,360 & 2,470 \\\hline \text { General factary } & 77,590 & 2,680 \\\hline\end{array}$$
Required:
a)How much total overhead was applied to products during the year?
b)By how much was overhead overapplied or underapplied? (Be sure to clearly label your Answer as to whether the overhead was overapplied or underapplied for each activity centre as well as for the total.)