Question

The Mega Construction Company recently switched to activity-based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $70 per machine hour. The cost accountant for the Finishing Department has gathered the following data:

Activity	Cost Drivers	Amount
Material handling	Tons of material handled	$	90
Machine setups	Number of production runs		3,700
Utilities	Machine hours		20
Quality control	Number of inspections	$	500

During April, Mega purchased and used $140,000 of direct materials at $20 per ton. There were eight (8) production runs using a total of 11,000 machine hours in April. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $860,000 for the month.

How much overhead costs were applied to the Work-in-Process Inventory during April using activity-based costing?

$770,000.

$755,600.

$860,000.

$885,600.

Answer 1