Columbus Company provides the following ABC costing information:

The above activities used by their three departments are:

How much of the total costs will be assigned to the Lawn Department?
A) $192,000
B) $464,000
C) $174,800
D) $154,667

Question

Columbus Company provides the following ABC costing information:

The above activities used by their three departments are:

How much of the total costs will be assigned to the Lawn Department?
A) $192,000 
B) $464,000 
C) $174,800 
D) $154,667

Quizplus · Accepted Answer

To find out the total cost assigned to the Lawn Department, we first need to calculate the overhead cost rate for each activity by dividing the total cost of each activity by their total activity levels.

Activity 1 OLAR = $360,000 / 3,000 hours = $120 per hour
Activity 2 OLAR = $400,000 / 20,000 units = $20 per unit
Activity 3 OLAR = $240,000 / 8,000 orders = $30 per order

Next, we need to multiply the overhead cost rate for each activity by the actual activity level used by each department to find out the overhead cost assigned to that department for each activity.

For the Lawn Department: 
Activity 1 Cost = 500 hours x $120 per hour = $60,000
Activity 2 Cost = 10,000 units x $20 per unit = $200,000
Activity 3 Cost = 600 orders x $30 per order = $$18,000

Total Cost Assigned to Lawn Department = $60,000 + $200,000 + $18,000 = $278,000

Therefore, the correct answer is C) $174,800.

Columbus Company Provides the Following ABC Costing Information