Question
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
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 data:
Activity | Cost Drivers | Amount | ||
Material handling | Tons of material handled | $ | 80 | |
Machine setups | Number of production runs | 4,000 | ||
Utilities | Machine hours | 15 | ||
Quality control | Number of inspections | 600 | ||
During April, Mega purchased and used $115,000 of direct materials at $20 per ton. There were 8 production runs using a total of 11,000 machine hours in April. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $890,000 for the month.
How much overhead costs were applied to the Work-in-Process Inventory during April using activity-based costing?
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