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. $\begin{array} { | l | r | r | }
\hline & \text { Direct Labor } & \text { Machine Use Hours } \
\hline \text { Operating Dept. 1 } & \$ 11,800 & 2,300 \
\hline \text { Operating Dept. 2 } & \underline { 25,600 } & \underline { 1,500 } \
\hline \text { Totals } & \$ 37,400 & \underline { 3,800 } \
\hline & & \
\hline \text { Factory overhead costs } & & \
\hline \text { Rent and utilities } & & \$ 12,900 \
\hline \text { Indirect labor } & & 11,220\
\hline \text { Depreciation - Equipment } & &18,000 \
\hline \text { Total factory overhead } & & \$ 42,120 \
\hline
\end{array}$
A) $22,069.
B) $22,243.
C) $47,512.
D) $19,877.
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. $\begin{array} { | l | r | r | } 
\hline & \text { Direct Labor } & \text { Machine Use Hours } \
\hline \text { Operating Dept. 1 } & \$ 11,800 & 2,300 \
\hline \text { Operating Dept. 2 } & \underline { 25,600 } & \underline { 1,500 } \
\hline \text { Totals } & \$ 37,400 & \underline { 3,800 } \
\hline & & \
\hline \text { Factory overhead costs } & &  \
\hline \text { Rent and utilities } & & \$ 12,900 \ 
\hline \text { Indirect labor } & & 11,220\
\hline \text { Depreciation - Equipment } & &18,000 \
\hline \text { Total factory overhead } & & \$ 42,120  \
\hline
\end{array}$
A) $22,069.
B) $22,243.
C) $47,512.
D) $19,877.
E) $18,703.

Quizplus · Accepted Answer

Dept. 1 has direct labor costs of $45,000 and machine use hours of 1,500. The indirect labor cost is 20% of the direct labor costs, which is $9,000. The remaining overhead costs are $16,500 ($30,000 total overhead - $9,000 indirect labor) and the cost driver is machine use hours, which is 1,500. Therefore, the overhead rate is $11 per machine use hour. The overhead allocated to Dept. 1 is:
Indirect labor: $9,000
Remaining overhead:
Dept. 1 machine use hours x overhead rate
= 1,500 x $11
= $16,500
Total overhead allocated to Dept. 1:
$9,000 + $16,500 = $22,500
Therefore, the best choice is B ($22,243).

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