The Mega Construction Company recently switched to activity-based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $60 per machine hour. The cost accountant for the Finishing Department has gathered the following dа ta: Activity Cost Drivers Amount Material handling Tons of material handled $ 80 Machine setups Number of production runs 3,850 Utilities Machine hours 25 Quality control Number of inspections $ 400 During April, Mega purchased and used $100,000 of direct materials at $20 per ton. There were eight (8) production runs using a total of 12,000 machine hours in April. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $875,000 for the month. How much overhead costs were applied to the Work-in-Process Inventory during April using traditional costing?

Question

Business

Carson Horn

13 September, 09:12

The Mega Construction Company recently switched to activity-based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $60 per machine hour. The cost accountant for the Finishing Department has gathered the following dа ta: Activity Cost Drivers Amount Material handling Tons of material handled $ 80 Machine setups Number of production runs 3,850 Utilities Machine hours 25 Quality control Number of inspections $ 400 During April, Mega purchased and used $100,000 of direct materials at $20 per ton. There were eight (8) production runs using a total of 12,000 machine hours in April. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $875,000 for the month. How much overhead costs were applied to the Work-in-Process Inventory during April using traditional costing?

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Answers (1)

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Nikolas Johns · Answer 1

overhead 720,000

Explanation:

We are asked for traditional costing:

so we need to find the rate adn the cost driver

rate $60 MO per machine hour

"total of 12,000 machine hours in April"

rate x machine hours = applied overhead

60 x 12,000 = 720,000

the data related to ABC costing is not relevant to the question. we are asked for traditional costing.