Asked by Nefetiti Easter on Jun 13, 2024
Verified
Gutknecht Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system: Distribution of resource consumption:
How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?
A) $138,000
B) $210,000
C) $180,000
D) $216,000
Resource Consumption
The amount of resources used during a process, such as raw materials, energy, or labor.
- Gain an understanding of primary and secondary allocations within Activity-Based Costing.
- Acknowledge the importance of cost pools in Activity-Based Costing and their effect on allocating costs.
Verified Answer
SC
Suléze CronjéJun 18, 2024
Final Answer :
B
Explanation :
To allocate costs in the first stage, we need to add up the total overhead costs and allocate them based on the activity cost drivers.
Total overhead costs = $1,470,000 + $600,000 + $330,000 = $2,400,000
Allocating costs to Other activity cost pool:
Other cost driver rate = $600,000 / 3,000 machine-hours = $200 per machine-hour
Activity consumption for Other = 900 machine-hours
Cost allocated to Other = $200 per machine-hour x 900 machine-hours = $180,000
Thus, the total cost allocated to the Other activity cost pool in the first-stage allocation is $180,000. Therefore, the best choice is B.
Total overhead costs = $1,470,000 + $600,000 + $330,000 = $2,400,000
Allocating costs to Other activity cost pool:
Other cost driver rate = $600,000 / 3,000 machine-hours = $200 per machine-hour
Activity consumption for Other = 900 machine-hours
Cost allocated to Other = $200 per machine-hour x 900 machine-hours = $180,000
Thus, the total cost allocated to the Other activity cost pool in the first-stage allocation is $180,000. Therefore, the best choice is B.
Learning Objectives
- Gain an understanding of primary and secondary allocations within Activity-Based Costing.
- Acknowledge the importance of cost pools in Activity-Based Costing and their effect on allocating costs.
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