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: Equipment expense $ 62,000 Indirect labor 11,400 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Processing Supervising Other Equipment expense 0.60 0.20 0.20 Indirect labor 0.10 0.30 0.60 In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow: Activity: MHs (Processing) Batches (Supervising) Product Z5 8,120 2,760 Product C8 19,880 1,840 Total 28,000 4,600 How much overhead cost is allocated to the Processing activity cost pool under activity-based costing in the first stage of allocation?

Answer 1

Answer:

$38,340

Explanation:

The computation of the amount of overhead cost allocated to the production activity is shown below:

= Equipment expense × activity cost pools + Indirect labor ×  activity cost pools

= $62,000 × 0.60 + $11,400 × 0.10

= $37,200 + $1,140

= $38,340

We simply added the equipment expense and the indirect labor after considering the activity cost pools of both overhead cost