Eccles Corporation uses an activity-based costing system with three activity cos

Question

Eccles Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: Costs: Wages and salaries Depreciation Utilities $261,000 252,000 143,000 $656,000 Skpped Total Distribution of resource consumption Wages and salaries Depreciation Utilities Activity Cost Pools Assembly Order Processing other 308 30% 658 35% 358 25% 358 358 10% Total 100 100% 100 How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool?

Explanation / Answer

Answer 1

Cost to be allocated to Assembly cost pool

= Wages & salaries * 35 % + Depreciation * 35 % + Utilities * 25 %

= $261,000 * 35 % + $252,000 * 35 % + $143,000 * 25 % = $91,350 + $88,200 + $35,750 = $215,300 (option b)

Answer 2

Cost to be allocated to Order Processing activity cost pool

=Wages & salaries * 35 % + Depreciation * 50 % + Rent * 35 %

= $490,000 * 35 % + $195,000 * 50 % + $215,000 * 35 % = $171,500 + $97,500 + $75,250 = $344,250

Activity Rate for Order Processing activity cost pool = Allocated cost / Number of orders

= $344,250 / 450 orders = $765 per order (option a)

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