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21 July, 07:24

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 $59,000 and indirect labor totals $8,000. 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 0.30 0.20 0.50

Required:

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

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  1. 21 July, 11:03
    0
    Overhead:

    Other 18,750

    Setting up 13,200

    Processing 34,850

    Explanation:

    We multiply each activity cost pool by the rate of each department, then we add them to get the total overhead per department:

    Processing

    Depreciation: 55% x 59,000 = 32,450

    Indirect labor: 30% x 8,000 = 2,400

    Total: 34,850

    Setting Up

    Depreciation: 20% x 59,000 = 11,800

    Indirect labor: 20% x 8,000 = 1,600

    Total: 13,200

    Other

    Depreciation: 25% x 59,000 = 14,750‬

    Indirect labor: 50% x 8,000 = 4,000

    Total: 18,750
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