The following is taken from Jeffers Company's internal records of its factory with two operating departments.The cost driver for indirect labor is direct labor costs,and the cost driver for the remaining items is number of hours of machine use.Compute the total amount of overhead allocated to Dept.1 using activity-based costing.
A)$22,069.
B)$19,877.
C)$47,512.
D)$22,243.
E)$18,703.

Question

The following is taken from Jeffers Company's internal records of its factory with two operating departments.The cost driver for indirect labor is direct labor costs,and the cost driver for the remaining items is number of hours of machine use.Compute the total amount of overhead allocated to Dept.1 using activity-based costing. 
A)$22,069. 
B)$19,877. 
C)$47,512. 
D)$22,243. 
E)$18,703.

Quizplus · Accepted Answer

First, we need to determine the overhead rate for each activity. 
For indirect labor: 
Overhead rate = Total indirect labor cost / Total direct labor cost = $25,500 / $170,000 = $0.15 per direct labor dollar

For machine use: 
Overhead rate = Total other overhead costs / Total machine hours = $38,000 / 4,750 = $8 per machine hour

Next, we need to allocate overhead to each department based on the activity usage.

For Department 1: 
Indirect labor overhead = $0.15 per direct labor dollar x $95,000 direct labor cost = $14,250 
Machine use overhead = $8 per machine hour x 1,800 machine hours = $14,993 
Total overhead allocated = $14,250 + $14,993 = $22,243

Therefore, the correct answer is D.

The Following Is Taken from Jeffers Company's Internal Records of Its