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: Distribution of Resource Consumption Across Activity Cost Pools: 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?

Explanation / Answer

Equipment Expense $ 35000

Cost allocated to processing activity = $ 35000 *0.60/1 = $ 21000

Indirect Labor $ 6000

cost allocated to processing activity = $ 6000 * 0.10 / 1 = $ 600

Total overhead cost allocated to processing activity is $ 21600

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