Bartow Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment expense and indirect labor--are allocated to the three activity cost pools--Processing, Supervising, and Other--based on resource consumption. Data to perform these allocations appear below: Distribution of Resource Consumption Across Activity Cost Pools:
In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:Activity:
How much overhead cost is allocated to the Processing activity cost pool under activity-based costing in the first stage of allocation?
A) $5,800
B) $9,800
C) $4,000
D) $7,400

Question

Bartow Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment expense and indirect labor--are allocated to the three activity cost pools--Processing, Supervising, and Other--based on resource consumption. Data to perform these allocations appear below:  Distribution of Resource Consumption Across Activity Cost Pools:
 In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:Activity:
 How much overhead cost is allocated to the Processing activity cost pool under activity-based costing in the first stage of allocation?
A) $5,800 
B) $9,800 
C) $4,000 
D) $7,400

Quizplus · Accepted Answer

To allocate overhead costs to activity cost pools in the first stage, we multiply the overhead costs by the cost driver rates.

For Processing: 
Equipment expense = $2,900 * 2 MHs = $5,800 
Indirect labor = $3,900 * 0 batches = $0 
Total allocated to Processing = $5,800

For Supervising: 
Equipment expense = $2,900 * 0 MHs = $0 
Indirect labor = $3,900 * 25 batches = $97,500 
Total allocated to Supervising = $97,500

For Other: 
Equipment expense = $2,900 * 4 MHs = $11,600 
Indirect labor = $3,900 * 10 batches = $39,000 
Total allocated to Other = $50,600

Therefore, the overhead cost allocated to the Processing activity cost pool is $5,800.

Bartow Corporation Uses an Activity Based Costing System to Assign