Question

In: Accounting

Clausen Company internal records of its factory with 2 operating departments. The cost driver for indirect...

Clausen Company internal records of its factory with 2 operating departments. The cost driver for indirect labor is direct labor house, and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of indirect labor allocated to Department 1 using activity based costing. (Please show the formula and how you got the answer)

DL HOURS MACHINE HOURS
Department 1 894 12,000
Department 2 2086 8,000
Totals 2980 20,000
Factory Overhead costs
Rent and Utilities 21,200
Indirect Labor 16,800
Depreciation - Equipment 13,500
Total Factory Overhead $51,500

Answers:

a) 8,000

b) 53,000

c) 12,270

d) 8, 480

e) 14,133

Solutions

Expert Solution

  • All working forms part of the answer
  • Note that you have asked for:

>Indirect labor,
>allocated to Department 1

  • The correct answer is $ 5,040 [which is equal to none of the option made available by you] but $ 5,040 is correct answer and it will the amount of indirect labor allocated to Department 1. So please check your options again.
  • The correct answer of $ 5,040 is worked out below for clear understanding:

A

Amount of Indirect Labor

$            16,800.00

B

Cost driver

Direct Labor hours

C [given]

Total Direct Labor hours

2,980 direct labor hours

D = A/C

Indirect Labor per direct labor hour

$       5.637583893 per Direct labor hour

[16800 / 2980]

E [given]

Direct Labor hour in Department 1

894 direct labor hours

F = D x C

Total amount of Indirect Labor allocated to Department 1

$               5,040.00 = ANSWER

[894 x 5.637583893]

ekkarill92 answered 1 year ago
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