The following is taken from Clausen Company’s internal records of its factory with two operating departments. The cost driver for indirect labor is direct labor hours, and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of overhead cost allocated to Dept. 1 using activity-based costing. Direct Labor Hours Machine Hours Operating Dept. 1 1,020 9,600 Operating Dept. 2 2,380 6,400 Totals 3,400 16,000 Factory overhead costs Rent and utilities $22,900 Indirect labor 18,500 Depreciation – Equipment 15,600 Total factory overhead $57,000 Multiple Choice$28,350.$5,550.$28,650.$23,100.$15,400. The following is taken from Clausen Company's internal records of its factory with two operating departments. The cost driver for indirect labor is direct labor hours,and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of overhead cost allocated to Dept. 1 using activity-basedcosting.Direct LaborMachineHoursHoursOperating Dept. 1Operating Dept. 21,0209,6002,3806,400Totals3,40016,000Factory overhead costsRent and utilities$22,900Indirect labor18,500Depreciation - Equipment15,600Total factory overhead$57,000

The overhead cost can be estimated using traditional costing or activity based costing. Using traditional approach, the pre determined overhead rate is calculated on the basis of single activity base. Using activity based costing, the pre determined overhead rate is calculated on the basis of different activity rates. Rent and utilities cost = $22,900 Indirect labor cost = $18,500 Depreciation expense - Equipment = $15,600 Total direct labor hours = 3,400 Total machine hours = 16,000 Using activity based costing, Overhead Applied to department 1 = (18,500 / 3,400 * 1,020) + (38,500 / 16,000 * 9,600) = $28,650 Hence, option c. $28,650 is the correct value for overhead cost applied to department 1.

Answered: The following is taken from Clausen…

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Chapter1: Financial Statements And Business Decisions

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The following is taken from Clausen Company’s internal records of its factory with two operating departments. The cost driver for indirect labor is direct labor hours, and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of overhead cost allocated to Dept. 1 using activity-based costing.

	Direct Labor Hours		Machine Hours
Operating Dept. 1		1,020			9,600
Operating Dept. 2		2,380			6,400
Totals		3,400			16,000

Factory overhead costs
Rent and utilities				$	22,900
Indirect labor					18,500
Depreciation – Equipment					15,600
Total factory overhead				$	57,000

Multiple Choice
$28,350.
$5,550.
$28,650.
$23,100.
$15,400.

The following is taken from Clausen Company's internal records of its factory with two operating departments. The cost driver for indirect labor is direct labor hours,
and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of overhead cost allocated to Dept. 1 using activity-based
costing.
Direct Labor
Machine
Hours
Hours
Operating Dept. 1
Operating Dept. 2
1,020
9,600
2,380
6,400
Totals
3,400
16,000
Factory overhead costs
Rent and utilities
$22,900
Indirect labor
18,500
Depreciation - Equipment
15,600
Total factory overhead
$57,000

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