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 $ 132,000Indirect labor $ 13,700Distribution of Resource Consumption Across Activity Cost Pools:Activity Cost PoolsProcessing Supervising OtherEquipment expense 0.30 0.40 0.30Indirect labor 0.30 0.40 0.30Processing 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 16,800 970Product X0 1,660 1,080Total 18,460 2,050What is the overhead cost assigned to Product X0 under activity-based costing

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facundobuzzetti facundobuzzetti · Answer 1 · 2021-03-30T03:38:49+02:00

Answer:

Product X0= $34,638.6

Explanation:

First, we need to allocate overhead costs to Processing and Supervising:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Processing:

Equipment expense= 132,000* 0.3= 39,600

Indirect labor= 13,700*0.3= 4,110

Total allocated costs to Processing= $43,710

Supervising:

Equipment expense= 132,000* 0.4= 52,800

Indirect labor= 13,700*0.4= 5,480

Total allocated costs to Supervising= $58,280

Now, we need to calculate the departmental allocation rates:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Processing:

Predetermined manufacturing overhead rate= 43,710 / 18,460

Predetermined manufacturing overhead rate= $2.37 per machine-hour

Supervising:

Predetermined manufacturing overhead rate= 58,280 / 2,050

Predetermined manufacturing overhead rate= $28.43 per batch

Finally, we can allocate costs to product X0:

Product X0= (1,660*2.37) + (1,080*28.43)

Product X0= $34,638.6