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 engineering changes.

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 engineering changes.

Quizplus · Accepted Answer

The cost pool associated with engineering changes can be calculated by multiplying the percentage of time spent on this activity (10%) by the total overhead cost associated with factory employees ($1,302,500). Therefore, the cost pool associated with engineering changes is $130,250 (10% x $1,302,500).

Exhibit 17-1 Maggie's Motors Manufactures Boat Motors