Question

Meester 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$79,800 Supervisory expense$4,900 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools MachiningOrder FillingOther Equipment depreciation0.400.300.30 Supervisory expense0.400.200.40 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)Orders (Order Filling) Product M01,270700 Product H29,4101,430 Total10,6802,130 How much overhead cost is allocated to the Order Filling activity cost pool under activity-based costing

Answer 1

Solution:

The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:

                                                                 Machining   Order Filling   Other

Equipment depreciation                         $ 40,600     $ 24,360    $ 16,240

Supervisory expense                               $ 5,600      $ 2,240     $ 3,360

Total OH                                                  $ 46,200    $ 26,600    $ 19,600

Activity cost pool                OH Cost (a)     Activity   Activity rate a/b

Order filling (Orders               )$ 26,600     2,890        $ 9.20