Monrovia Bike Corporation manufactures two models of bicycles: the "Gully Runner" and the "Claim Jumper." In the past, Monrovia had been using a traditional overhead allocation system based on machine hours. Monrovia has decided to switch to an activity-based costing system using two activity cost pools. Information related to the new system is as follows:

Monrovia Bike Corporation manufactures two models of bicycles: the "Gully Runner" and the "Claim Jumper." In the past, Monrovia had been using a traditional overhead allocation system based on machine hours. Monrovia has decided to switch to an activity-based costing system using two activity cost pools. Information related to the new system is as follows:
Activity: automated assembly, estimated OH cost $189,000, estimated activity 7,000 machine hours
Activity: Parts management, estimated OH cost $63,000, estimated activity 100 part numbers
Actual activity for the year for the two models of bicycles were as follows:
Claim Jumper: bicycles produced 300. Machine Hours used 2,400. Part Numbers used 70.
Gully Runner: bicycles produced 960. Machine Hours used 4,800. Part Numbers used 30.

If Monrovia's actual overhead cost was $257,600, what would total under- or over applied overhead be for the year under the new activity-based costing system?

Answer

		$200 over applied
		$3,800 over applied
		$3,800 under applied
		$200 under applied

 

 

If Monrovia was still using its traditional system, how much overhead cost would have been assigned to each Gully Runner bicycle?

Answer

		$135.00
		$175.00
		$180.00
		$200.00

 

 

Under the new activity-based costing system, what amount of overhead cost would Monrovia assign to each Claim Jumper bicycle?

Answer

		$357.00
		$363.00
		$656.25
		$657.00

 

 

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