Traughber Corporation uses an activity based costing system to assign overhead c

Question

Traughber 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:

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:

What is the overhead cost assigned to Product B4 under activity-based costing? (PLEASE SHOW WORK)

Explanation / Answer

1.Equipment cost 77,000 0.40 x 77,000 = 30800 2.allocated to processing 0.10 x 77,000 = 7700 3.allocated Supervisory expense 1,000 0.20 x 1,000 = 200 4.allocated to processing 0.40 x 1,000 = 400 5.allocated to supervising = (30800 + 200)/10000 = 3.1 6.per machine hour = (7700 + 400) /2000 = 4.05 7.per batch = (1200*3.1) + (400*4.05) = 5340 B4 overhead costs.

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