Exhibit 17-1 Maggie's Motors manufactures boat motors. Maggie is shifting from a traditional costing system to an activity-based costing system. She has started by identifying four overhead cost activities. Listed below is the table that Maggie created identifying the cost activities and the percentage of time spent on each activity by various factory employees.
Maggie also gathered the total overhead cost associated with each factory employee which is shown below:

-Refer to Exhibit 17-1. Using the information above, compute the amount of the cost pool associated with repairing equipment.

Question

Exhibit 17-1 Maggie's Motors manufactures boat motors. Maggie is shifting from a traditional costing system to an activity-based costing system. She has started by identifying four overhead cost activities. Listed below is the table that Maggie created identifying the cost activities and the percentage of time spent on each activity by various factory employees.
 Maggie also gathered the total overhead cost associated with each factory employee which is shown below:
 
-Refer to Exhibit 17-1. Using the information above, compute the amount of the cost pool associated with repairing equipment.

Quizplus · Accepted Answer

To compute the cost pool associated with repairing equipment, we need to multiply the percentage of time spent on the repairing equipment activity with the total overhead cost of each employee. 
The calculation is as follows:
Cost pool for repairing equipment = (20% x $300,000) + (20% x $225,000) = $60,000 + $9,750 = $69,750. 
Therefore, the choice is B.

Exhibit 17-1 Maggie's Motors Manufactures Boat Motors