Question

Goertz 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 the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Overhead costs:
Equipment depreciation $ 51,000
Supervisory expense $ 3,000
Distribution of Resource Consumption Across Activity Cost Pools:
Activity Cost Pools
Machining Order Filling Other
Equipment depreciation 0.40 0.10 0.50
Supervisory expense 0.20 0.30 0.50
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 J3 9,100 100
Product F7 900 900
Total 10,000 1,000
Finally, the costs of Machining and Order Filling are combined with the following sales and direct cost data to determine product margins.
Sales and Direct Cost Data:
Product J3 Product F7
Sales (total) $ 145,200 $ 90,700
Direct materials (total) $ 81,400 $ 38,600
Direct labor (total) $ 37,700 $ 42,400
How much overhead cost is allocated to the Order Filling activity cost pool under activity-based costing?
a. $5,100
b. $900
c. $27,000
d. $6,000

Answer 1

Answer: D. $6,000

Explanation:

Given the following :

Activity cost pool

- - - - - - - - - - - - - - - - - - Machining Order Filling Other

Equipment depreciation 0.40 - - - - - 0.10 - - 0.50

Supervisory expense - - 0.20 - - - - - 0.30 - - 0.50

First stage allocation:

Overhead cost

Equipment depreciation - $51,000

Supervisory expense - $3000

Order filling:

Equipment depreciation - $51,000 × 0.1 = $5100

Supervisory expense - $3000 × 0.3 = $900

Total overhead - $( 5100 + 900) = $6,000