Question

Findt & Thompson PLC, a consulting firm, uses an activity-based costing in which there are three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: Costs: Wages and salaries.. Travel expenses.. Other expenses $480,000 200,000 160,000 $840,000 Total Distribution of resource consumption: Activity Cost Pools Business Working On Engagements 60% Development 10% Other Total Wages and salaries... Travel expenses.. Other expenses. 30% 100% 55% 35% 10% 100% 20% 40% 40% 100% Required: a. How much cost, in total, would be allocated to the Working On Engagements activity cost pool? (5 points) b. How much cost, in total, would be allocated to the Business Development activity cost pool? (5 points)

Answer 1

Activity based costing system is a process in which overhead costs are accumulated based on the activity done and then those are allocated product based on actual consumption of those activities by the product. Total Cost allocation to $4,30,000 Ans a Working on Engagements Ans b Working on Business Development $1,82,000 Working Activity Cost Pool Total Others Working on Engagements Working on Business Development Costs Allocation Allocation Percentage Total Percentage Total cost Allocation Percentage Percentage Wages and Salaries $4,80,000 Travel Expense 60% $2,88,000 [$480000 x 60%] 55% $1,10,000 [$200000 x 55%] $32,000 [$160000 x 20%] $4,30,000 $4,80,000 $2,00,000 $1,60,000 $48,000 [$480000 x 10%] $70,000 [$200000 x 35%] $64,000 [$160000 x 40%] 30% $1,44,000 [$480000 x 30%] 10% 100% $20,000 [$200000 x 10%] $64,000 [$160000 x 40%] $2,28,000 $2,00,000 $1,60,000 $8,40,000 35% 10% 100% Others 20% 40% 40% 100% $1,82,000 $8,40,000