Question

Deemer Corporation has an activity-based costing system with three activity cost pools--Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:

Overhead costs:
Equipment expense	$	128,000
Indirect labor	$	11,000

Distribution of Resource Consumption Across Activity Cost Pools:

	Activity Cost Pools
	Processing	Supervising		Other
Equipment expense	0.20	0.60		0.20
Indirect labor	0.20	0.50		0.30

Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:

Activity:

	MHs (Processing)	Batches (Supervising)
Product F6	12,700	1,000
Product X0	1,150	860
Total	13,850	1,860

What is the overhead cost assigned to Product X0 under activity-based costing? (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• $2,311.50

• $40,367.00

• $38,055.00

• $50,345.00

Answer 1

Answer:

Option B: $ 40,367.00

Calculation:

	Processing	Supervising	Other
Equipment expense	$ 25,600.00	$ 76,800.00	$ 25,600.00
Indirect labor	$   2,200.00	$   5,500.00	$   3,300.00
Total	$ 27,800.00	$ 82,300.00	$ 28,900.00

Now,

Cost assignment to X0 = (27,800 * 1,150 / 13,850) + (82,300 * 860 / 1,860)

= $ 40,367.00

Hence, option 'B' is correct and rest all are incorrect.

In case of any clarification or doubt, please feel free to comment.