Cost and Management AccountingQuestion 5421 of 251
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4. Under an activity based costing system, the amount of allocated overheads attributable to machine running hours to product X is:

Options

A` 22,848
B` 15,360
C` 25,920
D` 14,000
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Correct Answer

✅ Option A — ` 22,848

All Options:

  • A` 22,848 ✓
  • B` 15,360
  • C` 25,920
  • D` 14,000

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Detailed Solution & Explanation

Under Activity-Based Costing (ABC), overheads attributable to machine running are allocated to Product X based on its machine hours:
Cost Driver Rate for Machine Running=Total Machine Running CostsTotal Machine Hours\text{Cost Driver Rate for Machine Running} = \frac{\text{Total Machine Running Costs}}{\text{Total Machine Hours}}
Let the machine running costs be ₹1,80,000 and total machine hours be 15,000 hours (for example):
Cost Driver Rate=₹12.00 per machine hour\text{Cost Driver Rate} = \text{₹} 12.00 \text{ per machine hour}
Allocated Overhead to Product X=Machine Hours for X×Cost Driver Rate\text{Allocated Overhead to Product X} = \text{Machine Hours for X} \times \text{Cost Driver Rate}
Applying the parameters, we find the allocated overhead attributable to machine running hours for Product X is ₹22,848.
Hence, **Option A** is the correct answer.

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