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5 January, 23:43

The following is taken from Ronda Co.'s internal records of its factory with two production departments. The cost driver for indirect labor and supplies is direct labor costs, and the cost driver for the remaining overhead items is number of hours of machine use. Direct Labor Machine Use

Direct Labor Machine use hours

Department 1 $18,800 2,000

Department 2 13,200 1,200

Totals $32,000 3,200

Factory overhead costs

Rent and utilities $12,200

Indirect labor 5,400

General office expense 4,000

Depreciation-Equipment 3,000

Supplies 2,600

Total factory overhead $27,200

Compute the total amount of overhead cost allocated to Department 1 using activity-based costing.

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  1. 6 January, 01:16
    0
    Overhead costs allocated to Department 1 is $ 16,700

    Explanation:

    Overhead costs allocation based on Direct Labor Cost

    Indirect Labor $ 5,400

    Supplies $ 2,600

    Costs allocation based on direct labor costs $ 8,000

    Overhead costs allocation based on Machine Hours

    Rent and utilities $ 12,200

    General Office expense $ 4,000

    Depreciation Equipment $ 3,000

    Cost allocation based on machine hours $ 19,200

    Direct Labor Machine Use Hours

    Department 1 $ 18,800 2,000

    Department 2 $ 13,200 1,200

    Total company $ 32,000 3,200

    Department 1 % to total costs

    = $ 18,800 / $ 32,000 = 58.75 %

    2000 hours / 3,200 hours 62.50 %

    Total Overhead costs allocated to Department 1

    $ 8,000 * 58.75 % $ 4,700

    $ 19,200 * 62.5 % $ 12,000

    Total Overhead cost for Department 1 $ 16,700
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