Second-Stage Allocation [LO7-4]

Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Activity Rates Supporting direct labor $ 10 per direct labor-hour Machine processing $ 3 per machine-hour Machine setups $ 45 per setup Production orders $ 150 per order Shipments $ 115 per shipment Product sustaining $ 750 per product Activity data have been supplied for the following two products: Total Expected Activity K425 M67 Number of units produced per year 200 2,000 Direct labor-hours 1,075 50 Machine-hours 2,400 40 Machine setups 13 1 Production orders 13 1 Shipments 26 1 Product sustaining 1

Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

Instructions are listed below.

Explanation:

Giving the following information:

Activity cost pools:

Direct labor $ 10 per direct labor-hour

Machine processing $ 3 per machine-hour

Machine setups $ 45 per setup

Production orders $ 150 per order

Shipments $ 115 per shipment

Product sustaining $ 750 per product Activity

Total Expected Activity K425:

Number of units produced per year 200

Direct labor-hours 1,075

Machine-hours 2,400

Machine setups 13

Production orders 13

Shipments 26

Product sustaining 1

Total Expected Activity M67:

Number of units produced per year 2,000

Direct labor-hours 50

Machine-hours 40

Machine setups 1

Production orders 1

Shipments 1

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH K425 = 1,075*10 + 3*2,400 + 45*13 + 150*13 + 115*26 + 750 = $24,225

Allocate MOH M67 = 10*50 + 3*40 + 45*1 + 150*1 + 115*1 = $930