Question

Beckley Corporation has provided the following data from its activity based costing accounting systems:

Indirect factory wages $16,000

Factor Equipment Depreciation $193,000

Distribution of resource Consumption across activity cost pools:

Indirect factory wages customer orders(48%) product processing (47%) other (5%) total(100%)

Factory equipment depreciation customer orders(61%) product processing (25%) other(14%) total(100%)

The other activity cost pool consists of the costs of idle capacity and organization sustaining costs that are not assigned to products

Required:

a) determine the total amount of indirect factory wages and factory equipment depreciation costs that would be allocated to the Product Processing activity cost pool.

b) determine the total amount of indirect factory wages and factory equipment depreciation costs that would NOT be assigned to products.

Answer 1

a.	Allocation to product processing activity cost pool.
	Overhead cost pool	OH COST	Customer Order	Product Processing	Other	Total Activity %
	Indirect Factory wages	$                              16,000	48%	47%	5%	100%
	Factor Equipment Depreciation	$                            193,000	61%	25%	14%	100%
	Total OH Cost	$                            209,000
	Overhead cost pool	OH COST	Product Processing	Activity Cost Pool
	Indirect Factory wages	$                              16,000	47%	$                    7,520
	Factor Equipment Depreciation	$                            193,000	25%	$                 48,250
	Total OH Cost	$                            209,000		$                 55,770
b.	Unassigned Costs:
	Overhead cost pool	OH COST	others	Activity Cost Pool
	Indirect Factory wages	$                              16,000	5%	$                       800
	Factor Equipment Depreciation	$                            193,000	14%	$                 27,020
	Total OH Cost	$                            209,000		$                 27,820

*Activity-based costing is the process that assigns overhead to products based on the various activities that drive overhead costs.

*Cost pool- accumulation of costs that are incurred during the production of the activities included in the activity cost pool

*The five stages of the ABC process are:
- Identify the activities performed in the organization;
-. Determine activity cost pools;
-. Calculate activity rates for each cost pool;
-. Allocate activity rates to product;
-. Calculate unit product costs.

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