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 $51,000 and indirect labor totals $4,000. Data concerning the distribution of resource consumption across activity cost pools appear below:

Processing Setting Up Other
Equipment depreciation 0.55 0.20 0.25
Indirect labor 0.40 0.30 0.30



Required:


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

Answer 1

To allocate overhead costs to activity cost pools using activity-based costing, multiply the overhead costs by the proportion of resource consumption allocated to each cost pool. The overhead costs assigned to each activity cost pool are as follows: Processing: $29,650, Setting Up: $11,400, Other: $13,950.

Step-by-step explanation:

To assign overhead costs to activity cost pools using activity-based costing, you need to multiply the overhead costs by the proportion of resource consumption allocated to each activity cost pool. Let's calculate the allocation for each cost pool:

Processing: Equipment depreciation = $51,000 * 0.55 = $28,050, Indirect labor = $4,000 * 0.40 = $1,600

Setting Up: Equipment depreciation = $51,000 * 0.20 = $10,200, Indirect labor = $4,000 * 0.30 = $1,200

Other: Equipment depreciation = $51,000 * 0.25 = $12,750, Indirect labor = $4,000 * 0.30 = $1,200

Therefore, the overhead costs assigned to each activity cost pool are as follows:

Processing: $28,050 + $1,600 = $29,650

Setting Up: $10,200 + $1,200 = $11,400

Other: $12,750 + $1,200 = $13,950