Manton Corporation uses an activity based costing system to assign overhead cost

Question

Manton Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs-equipment expense and indirect labor-are allocated to the three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below:

OVERHEAD COSTS:  

There are 3 activity cost pools established: Processing, Supervising and Other.

Distribution of Resource Consumption across Activity Cost Pools:

How much overhead cost is allocated to the Processing activity cost pool under activity-based costing in the first stage of allocation?

.

Equipment expense $ 35,000 Indirect labor $ 6,000

Explanation / Answer

A.21,600.

the following table shows it:

Equipment expense allocated to processing ($35,000 * (0.60 / (0.60+0.20+0.20))

=>$35,000 * (0.60 / 1)

Equipment expense allocated to processing ($35,000 * (0.60 / (0.60+0.20+0.20))

=>$35,000 * (0.60 / 1)

$21,000 indirect labour expense allocated to processing ($6,000*(0.10 / 0.10+0.30+0.60) =>$6,000 * (0.10/1) $600 Total overhead allocated to processing activity cost pool under activity based costing $21,600

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