Question

Betterton Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs—equipment depreciation and supervisory expense-are allocated to three activity cost pools—Machining, Order Filling, and Other—based on resource consumption. Data to perform these allocations appear below:

Overhead costs:

Equipment depreciation $ 60,250

Supervisory expense $ 5,400

Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.50 0.30 0.20

Supervisory expense 0.10 0.40 0.50

In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow: Activity: MHs (Machining) Orders (Order Filling) Product A8 4,600 2,100 Product K2 25,000 6,300 Total 29,600 8,400 How much overhead cost is allocated to the Machining activity cost pool under activity-based costing in the first stage of allocation?

$12,755

$30,665

$540

$30,125

Answer 1

	Machining
Equipment depreciation	30125	=60250*0.50
Supervisory expense	540	=5400*0.10
Overhead cost allocated	30665
Option 2 $30,665 is correct