Question

The following is taken from Ronda Co.'s internal records of its factory with two production departments. The cost driver for indirect labor and supplies is direct labor costs, and the cost driver for the remaining overhead items is number of hours of machine use. 

Machine Use Hours 1,980 1,220 3,200 Direct Labor Department 1 $18, 600 Department 2 13,400 Totals $32,000 Factory overhead costs Rent and utilities Indirect labor General office expense Depreciation Equipment Supplies Total factory overhead $12,000 5,350 4,100 3,100 2,650 $27,200 

compute the total amount of overhead cost allocated to Department 1 using activity-based costing

Answer 1

Solution: Activity-Based Costing

Cost per cost driver Statement of Cost per Cost Drivers Cost Particulars Amount ($) Cost Driver Driver total Factory Overhead Costs Rent and Utilities 12,000 Machine use hours 3,200 Indirect Labour 5,350 Direct labour costs 32,000 General Office Expenses 4,100 Machine use hours 3,200 Depreciation - Equipment 3,100 Machine use hours 3,200 Supplies 2,650 Direct labour costs 32,000 3.75 0.17 1.28 0.97 0.08

Computation of total amount of overhead cost allocated to Department 1 Particulars Cost Driver Qty of cost Cost per y Amount driver cost driver Factory Overhead Costs Rent and Utilities Machine use hours Indirect Labour Direct labour costs General Office Expenses Machine use hours Depreciation - Equipment Machine use hours Supplies Direct labour costs 1980) 18600 1980 1980 18600 3.75 0.17 1.28 0.97 0.08 7,425.00 3,109.69 2,536.88 1,918.13 1,540.31 Total Amount of overhead cost allocated 16,530.00

Total Amount of overhead cost allocate is $16,530 for Department 1.