Question

Moorman Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. The company's overhead costs consist of equipment depreciation and indirect labor and are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Equipment depreciation totals $59,000 and indirect labor totals $8,000. Data concerning the distribution of resource consumption across activity cost pools appear below:
Processing Setting Up Other
Equipment depreciation 0.55 0.20 0.25
Indirect labor 0.30 0.20 0.50
Required:
a. Assign overhead costs to activity cost pools using activity-based costing.

Answer 1

Answer:

Overhead:

Other           18,750

Setting up   13,200

Processing 34,850

Explanation:

We multiply each activity cost pool by the rate of each department, then we add them to get the total overhead per department:

Processing

Depreciation: 55% x 59,000 = 32,450

Indirect labor: 30% x   8,000 =   2,400  

Total:                                           34,850

Setting Up

Depreciation: 20% x 59,000  =  11,800

Indirect labor: 20% x   8,000  =   1,600  

Total:                                            13,200

Other

Depreciation: 25% x 59,000  =  14,750‬  

Indirect labor: 50% x   8,000  =  4,000  

Total:                                           18,750