Mussenden Corporation has an activity-based costing system with three activity c

Question

Mussenden 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 three activity cost pools based on resource consumption. Data used in the first stage allocations follow: Overhead costs: Equipment depreciation $ 88,500 Supervisory expense $ 10,150 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.60 0.10 0.30 Supervisory expense 0.50 0.20 0.30 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 P4 6,120 510 Product S4 10,880 1,190 Total 17,000 1,700 How much overhead cost is allocated to the Order Filling activity cost pool under activity-based costing?

Explanation / Answer

Computation of Overhead cost Allocated to the Order Filling Cost Cost Machining-Cost allocated Order filling-Cost allocated Equipment depreciation $88,500 $53,100.00 $8,850.00 88500*.6 88500*.1 Supervisory exp $10,150 $5,075.00 $2,030.00 10150*.5 10150*.2 Total overhead (A) $58,175.00 $10,880.00 Total no. (B) 17000 1700 Overhead rate (A/B) $3.42 $6.40 Overhead allocated to S4 Machining-10880*3.42 $37,210.00 Order Filling-1190*6.4 $7,616.00 Total overhead cost allocated $44,826.00

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