Laib Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs:
How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?
A) $187,000
B) $133,000
C) $264,000
D) $66,000

Question

Laib Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs: 
How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?
A) $187,000 
B) $133,000 
C) $264,000 
D) $66,000

Quizplus · Accepted Answer

In the first-stage allocation, the total overhead costs of $799,000 are allocated based on the three activity cost pools. The Other activity cost pool has a total cost driver of 14,000 direct labor hours, which represents 35% of the total cost driver. Therefore, the cost allocated to the Other activity cost pool is $799,000 x 35% = $279,650. However, this amount includes $146,650 of direct materials and $13,000 of depreciation, which should be excluded since they are not part of the Other activity cost pool. Therefore, the total cost allocated to the Other activity cost pool in the first-stage allocation is $279,650 - $146,650 - $13,000 = $120,000.

Laib Corporation Uses an Activity-Based Costing System with Three Activity