Question - Welco uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs - Supervisory expense and Heating and Cooling expense - are allocated to three activity cost pools - Handling, Painting, and Other - based on resource consumption. Data to perform these allocations appear below:
Overhead Costs:
Supervisory expense: $150,000
Heating and Cooling expense: $155,000
Distribution of Resource Consumption across Activity Cost Pools:
|
Overhead Cost
|
Activity Cost Pools
|
|
Handling
|
Painting
|
Other
|
|
|
Supervisory expense
|
0.40
|
0.44
|
0.16
|
|
|
Heating and Cooling expense
|
0.32
|
0.42
|
0.26
|
|
In the second stage, Handling costs are assigned to products using orders filled and Painting costs are assigned to products using the number of direct labor hours. The costs in the Other activity pool are not assigned to products. Activity data for the company's two products is as follows:
|
orders filled
|
direct labor hours
|
|
Product BA-09:
|
3,900
|
2,800
|
|
Product XR-8:
|
1,600
|
1,600
|
|
Total:
|
5,500
|
4,400
|
PART A: How much overhead cost is assigned to the Painting activity cost pool under activity based costing in the first stage of allocation?
- a) $131,100
- b) $60,000
- c) $62,000
- d) $113,100
- e) $65,100
PART B: The activity rate for the Painting activity cost pool under activity based costing is closest to:
- a) $29.80
- b) $10.91
- c) $25.70
- d) $22.73
- e) $14.80
PART C: What is the overhead cost assigned to Product BA-09 under activity based costing?
- a) $161,144
- b) $77,716
- c) $115,311
- d) $109,600
- e) $113,100