Allocations in an ABC System
Danato, Inc., applies manufacturing overhead to production using an activity-based costing system. The company’s utilities cost pool has accumulated $180,000, its maintenance cost pool has accumulated $240,000, and its set-up cost pool has accumulated $60,000. The company has two product lines, Deluxe and Basic. The utilities cost pool is allocated to these product lines on the basis of machine hours. The maintenance pool is allocated on the basis of work orders. The set-up pool is allocated on the basis of production runs.
a. Allocate the utilities cost pool to each product line assuming the Deluxe model used 6,400 machine hours and the Basic model used 1,600 machine hours.
b. Allocate the maintenance pool to each product line assuming the Deluxe model required 50 work orders and the Basic model required 150 work orders.
c. Allocate the set-up pool to each product line assuming the Deluxe model required 30 production runs and the Basic model required 70 production runs.
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