Question

Moorman Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. The company's overhead costs consist of equipment depreciation and indirect labor and are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Equipment depreciation totals $55,000 and indirect labor totals $6,000. Data concerning the distribution of resource consumption across activity cost pools appear below:

	Processing	Setting Up	Other
Equipment depreciation	0.55	0.10	0.35
Indirect labor	0.20	0.10	0.70

Required:

Assign overhead costs to activity cost pools using activity-based costing.

	Activity Cost Pools
	Processing	Setting Up	Other	Total
Equipment depreciation
Indirect labor
Total

Answer 1

	Processing	Setting Up	Other
Equipment Depreciation	$55,000*0.55 = $30,250	$55,000*0.10 = $5,500	$55,000*0.35 = $19,250
Indirect labor	$6,000*0.20 = $1,200	$6,000*0.10 = $600	$6,000*0.70 = $4,200
Total	$                                31,450	$                                6,100	$                                23,450

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