Problem
Maria is an accountant for Sheridan, Inc., a small factory that manufactures disposable hospital gowns and slippers. Previously, Sheridan had been utilizing a traditional costing system to account for its budgeted Manufacturing Overhead (MOH) costs. After a few years, Maria recommended that it opt for Activity-Based Costing (ABC) as it would afford the company the opportunity to better account for its costs. She determined that Sheridan had three key activities to use for MOH budgeted costs: Material sorting, garment inspection, and materials management wages. She has collected the following data:
Material sorting: $38900 (3890 sorting hours)
Garment inspection: $55100 (4238 inspection hours)
Materials management wages: $18200 (12600 management hours)
If slippers used 3000 inspection hours, what amount of the garment inspection MOH costs will be allocated to the gowns?