Johnson Company has the following overhead costs: machine setup $25,000; factory maintenance $10,000; heating and lighting $15,000; and selling expenses of $5,000. What is the total overhead costs using activity-based costing?

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Business

Landin Hardin

2 October, 06:16

Johnson Company has the following overhead costs: machine setup $25,000; factory maintenance $10,000; heating and lighting $15,000; and selling expenses of $5,000. What is the total overhead costs using activity-based costing?

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Answers (1)

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Bryson Chapman · Answer 1

Total overhead = $50,000

Explanation:

Activity based costing is a method of allocating production cost to various activities, from example to accounting, sales, operations and son on. A given standard amount is multiplied by the units of an activity.

In this instance the overhead includes machine setup, factory maintenance, heating and lighting.

Total overhead = machine setup + factory maintenance + heating and lighting

Total overhead = 25,000 + 10,000 + 15,000

Total overhead = $50,000

Sales expense is a direct expense so is not included.