Question

Huish Awnings makes custom awnings for homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity cost pools:

Overhead Costs:
Production overhead $150,000
Office expense 100,000
Total $250,000

Distribution of resource consumption:

Activity Cost Pools
Making Awnings Job Support Other Total
Production overhead 45% 40% 15% 100%
Office expenses 8% 65% 27% 100%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows:

Activity Cost Pool Annual Activity
Making awnings 5,000 metres
Job support 200 jobs
Other Not applicable

Prepare the first-stage allocation of overhead costs to the activity cost pools

Answer 1

Answer and Explanation:

The preparation of the First stage allocation of overhead costs to the activity cost pools is presented below

Particulars Making awnings Job Support Other Total

Production Overhead $67,500 $60,000 $22,500 $150,000

Office Expenses $8,000 $65,000 $27,000 $100,000

The production overhead is allocated in 45% 40%, 15% and 100%

And,

The office expenses is allocated in 8%, 65%, 27% and 100%

The same is shown above