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Pearson Brothers recently reported a switch to activity-based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $50 per machine hour. The manager for the Finishing Department has gathered the following data: Activity Material handling Machine setups Utilities Quality control 0 0 0 During May, Pearson purchased and used $120,000 of direct materials at $10 per ton. There were eight (8) production runs using a total of 13,000 machine hours in May. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $840,000 for the month. Using ABC, how much overhead costs were applied to the Work-in-Process Inventory during May? O $650,000. Cost Drivers Tons of material handled Number of production runs Machine hours Number of Inspections O $947,600. O$840,000. Amount $60 3,400 15 $ 450

Pearson Brothers recently reported a switch to activity-based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $50 per machine hour. The manager for the Finishing Department has gathered the following data: Activity Material handling Machine setups Utilities Quality control 0 0 0 During May, Pearson purchased and used $120,000 of direct materials at $10 per ton. There were eight (8) production runs using a total of 13,000 machine hours in May. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $840,000 for the month. Using ABC, how much overhead costs were applied to the Work-in-Process Inventory during May? O $650,000. Cost Drivers Tons of material handled Number of production runs Machine hours Number of Inspections O $947,600. O$840,000. Amount $60 3,400 15 $ 450

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Pearson Brothers recently reported a switch to activity-based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $50 per machine hour. The manager for the Finishing Department has gathered the following data: Activity Material handling Machine setups Utilities Quality control O$650,000. O$947,600. During May, Pearson purchased and used $120,000 of direct materials at $10 per ton. There were eight (8) production runs using a total of 13,000 machine hours in May. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $840,000 for the month. Using ABC, how much overhead costs were applied to the Work-in-Process Inventory during May? 000 Cost Drivers Tons of material handled Number of production runs Machine hours Number of Inspections $840,000. O $942,600. Amount $ 60 3,400 15 $450
Transcribed Image Text:Pearson Brothers recently reported a switch to activity-based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $50 per machine hour. The manager for the Finishing Department has gathered the following data: Activity Material handling Machine setups Utilities Quality control O$650,000. O$947,600. During May, Pearson purchased and used $120,000 of direct materials at $10 per ton. There were eight (8) production runs using a total of 13,000 machine hours in May. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $840,000 for the month. Using ABC, how much overhead costs were applied to the Work-in-Process Inventory during May? 000 Cost Drivers Tons of material handled Number of production runs Machine hours Number of Inspections $840,000. O $942,600. Amount $ 60 3,400 15 $450
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