Manton Corporation uses an activity based costing system to assign overhead cost

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:

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:

How much overhead cost is allocated to the Processing activity cost pool under activity-based costing in the first stage of allocation?

$9,550

$35,550

$34,500

$1,050

Overhead costs: Equipment expense $ 57,500 Indirect labor 10,500

Explanation / Answer

Overhead cost allocated to processing activity cost pool under activity based costing in first stage of allocation is $ 35550

Calculation is as below:

Equipment expense

=57500 X 0.60

= 34500

=10500 X 0.10

= 1050

Particulars Total amount (A) Allocation (B) Allocated amount (A X B)

Equipment expense

57500 0.60

=57500 X 0.60

= 34500

Indirect labour 10500 0.10

=10500 X 0.10

= 1050

TOTAL 35550

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