The Other activity cost pool consists of the costs of idle c

The \"Other\" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.

How much indirect factory wages and factory equipment depreciation cost would NOT be assigned to products using the activity-based costing system?

$577,000

$346,000

$109,600

$0

The \"Other\" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.

How much indirect factory wages and factory equipment depreciation cost would be assigned to the Customer Orders activity cost pool?

$422,400

$565,400

$389,900

$839,000

Lehner Corporation has provided the following data from its activity-based costing accounting system:

Solution

Answer

Calculation of allocation of overheads

Cost to be assigned

Cost not to be assigned

Cost

Amount

Customer Orders

Product Processing

Other

Total

Indirect Factory Wages

577000

[35%] 201950

[55%] 317350

[10%] 57700

[100%] 577000

Factory Equipment depreciation

346000

[30%] 103800

[55%] 190300

[15%] 51900

[100%] 346000

Since, ‘other’ allocated cost is not to be assigned and its total is asked in the question, The CORRECT ANSWER will be 57700 + 51900 = $ 109,600 [OPTION – C]

Cost to be assigned

Cost not to be assigned

Cost

Amount

Customer Orders

Product Processing

Other

Total

Indirect Factory Wages

569000

[60%] 341400

[25%] 142250

[15%] 85350

[100%] 569000

Factory Equipment depreciation

270000

[30%] 81000

[45%] 121500

[25%] 67500

[100%] 270000

Question’s requirement is regarding total cost allocated to Customer Order activity cost pool, and the answer will e 341400 + 81000 = $422,400 which is OPTION - A

		Cost to be assigned	Cost not to be assigned
Cost	Amount	Customer Orders	Product Processing	Other	Total
Indirect Factory Wages	577000	[35%] 201950	[55%] 317350	[10%] 57700	[100%] 577000
Factory Equipment depreciation	346000	[30%] 103800	[55%] 190300	[15%] 51900	[100%] 346000