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Copy of Riley's Land Management Company has $27,000 in indirect costs operating her company. She has...

Copy of Riley's Land Management Company has $27,000 in indirect costs operating her company. She has identified three activities that drive these indirect cost and created three related cost pools as detailed below:

Activities Costs Cost-drivers
Labor Hours $24,000 800 hours
Gas $1,800 500 gallons
Invoices $1,200 250 invoices
Total costs $27,000

Riley has three divisions. Each division uses different amount of the cost driving activities as described below.

Department

Lawn

Bush

Plowing

 Total
Labor hours (hours)

330

220

?

 800
Gas (gallons)

120

?

60

 500
Invoices (invoices)

?

40

90

 250

How much indirect cost would be assigned to plowing if all indirect costs are allocated using gallons of gas used as the only allocation base?

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Homework Answers

Answer #1

Answer----$3240

Overhead rate

$          54.00

Gallons in Plowing

60

Indirect cost assigned ($54 x 60)

$    3,240.00

A

Total Overhead cost

$        27,000.00

B

Total Gallons of gas

500

C=A/B

Overhead rate

$    54.00

Allocation rate used to assign costs to the divisions if all indirect costs were allocated using gallons of gas used as the only allocation base = $54 per Gallon of gas

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