Capizzi Corporation has an activity-based costing system with three activity cos

Question

Capizzi Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to three activity cost pools based on resource consumption. Data used in the first stage allocations follow: Overhead costs: Equipment depreciation $80,400 Supervisory expense $4,100 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.60 0.20 0.20 Supervisory expense 0.60 0.10 0.30 Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow: Activity: MHs (Machining) Batches (Order Filling) Product Y7 1,300 790 Product V2 9,540 1,480 Total 10,840 2,270 How much overhead cost is allocated to the Order Filling activity cost pool under activity-based costing? $410, $16,080, $16,490, or $63,910

Explanation / Answer

Equipment depreciation $80,400

0.60 x 80,400 = 48,240 allocated to machining
0.20 x 80,400 = 16,080 allocated to order filling

Supervisory expense $4,100

0.60 x 4,100 = 2,460 allocated to machining
0.10 x 4,100 = 410 allocated to order filling

(48,240 + 2,460) / 10,840 = 4.68 per machine hour
(16,080 + 410) / 2,290 = 7.20 per orderfilling

(790 x 7.20) + (1,480 x 7.20) = $16,344 Order Filling overhead costs

So, the closest answer is $16,490

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