Eagleton Inc. is a retail business that sells fedoras and other decorative hats. They are in the process of evaluating their costing systems and working towards an Activity-Based Costing (ABC) implementation. They have compiled the following data about their Manufacturing Overhead (MOH) costs:
The production department tallied the following amounts in a recent production run: 3,600 square feet; 2,009 supervisor hours; and 998 pounds of indirect materials. What is the total amount of facility-level MOH costs allocated to the production run?
A) $0.00
B) $4,320.00
C) $7,928.40
D) $24,588.00

Question

Eagleton Inc. is a retail business that sells fedoras and other decorative hats. They are in the process of evaluating their costing systems and working towards an Activity-Based Costing (ABC) implementation. They have compiled the following data about their Manufacturing Overhead (MOH) costs:
 The production department tallied the following amounts in a recent production run: 3,600 square feet; 2,009 supervisor hours; and 998 pounds of indirect materials. What is the total amount of facility-level MOH costs allocated to the production run?
A) $0.00 
B) $4,320.00 
C) $7,928.40 
D) $24,588.00

Quizplus · Accepted Answer

This question requires the identification of which, if any, of the activities listed are at the facility level. In this case, the insurance on the factory would be considered a facility-level cost. Next, calculate the per-unit cost: $12,000/10,000 square feet = $1.20 per square foot. Lastly, multiply this by the square footage used: $1.20 per square foot times 3,600 square feet equals $4,320.00 allocated to facility-level activities (Choice B).