The following is taken from Clausen Company\'s internal records of its factory w
ID: 2330190 • Letter: T
Question
The following is taken from Clausen Company's internal records of its factory with two operating departments. The cost driver for indirect labor is direct labor hours, and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of indirect labor allocated to Dept. 1 using activity-based costing.
Hours Machine
Hours Operating Dept. 1 978 12,000 Operating Dept. 2 2,282 8,000 Totals 3,260 20,000 Factory overhead costs Rent and utilities $ 21,400 Indirect labor 18,200 Depreciation – Equipment 14,900 Total factory overhead $ 54,500
Explanation / Answer
Indirect labor Cost per Labor Hour
(A)
Total Indirect labor Cost
$ 18,200.00
(B)
Total Direct Labor Hours
3260
(A/B)
Indirect labor Cost per Labor Hour
$ 5.58
Statement of Cost Allocation
Department 1
(A)
Labor Hours
978
(B)
Indirect labor Cost per Labor Hour
$ 5.58
(A*B)
Cost allocated
$ 5,460.00
Department 2
(A)
Labor Hours
2282
(B)
Labor Hours
$ 5.58
(A*B)
Cost allocated
$ 12,740.00
Answer
Total Cost allocated to
Department 1
$ 5,460.00
Department 2
$ 12,740.00
Total Allocation
$ 18,200.00
Indirect labor Cost per Labor Hour
(A)
Total Indirect labor Cost
$ 18,200.00
(B)
Total Direct Labor Hours
3260
(A/B)
Indirect labor Cost per Labor Hour
$ 5.58
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