Question

The Mega Construction Company recently switched to activity based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $60 per machine hour The cost accountant for the Finishing Department has gathered the following data Amount $ 95 Activity Matenal handling Mochine Setups tes Quality Control Cost Drivers Tons of material Handled Number of production runs Machine Hours Number of inspections 2500 thing Department groductions using a total of 15.000 machine hours in Aarl The manager of the During April, Meo purchased and used $130,000 of direct materials at $20 perton There were eight reeded 12 inspections Actual overhead costs totaled 5850 000 for the month How much overhead costs were applied to the Work in Process Inventory during April using traditional casting O $536.500 O $900.000 5961,500 O $850.000

Answer 1

Calculation & - Overhead Cost applied using traditional Costing :- Applied overhead = Overhead X Allocation bare Cost leate used $60 x 15000 m 8 900.000 2nd option is correct answel. under traditional Costing a overhead leate is Calculated by dividing Estimated overhead cost by Estimated allocation base Than this reate is multiplied by actual allocation base esedo Here Overhead leate is al velady Calculate and allocation base is machine howes. Actual machine howes wed are 15000 hour & rate is $60 per machine hour. multipu both to Calculate appred ovelhead Coste