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Furniture Company uses an activity-based costing system in which there are three activity cost pools
Furniture Company uses an activity-based costing system in which there are three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system:
Costs: Manufacturing overhead$600,000Selling and administrative expenses300,000Total$900,000
Distribution of Resource Consumption:
Activity Cost Pools Order SizeCustomer SupportOtherTotalManufacturing overhead45%50%5%100%Selling and administrative expenses40%45%15%100%
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of the costs to the activity cost pools.
How much cost, in total, would be allocated in the first-stage allocation to the Customer Support activity cost pool?
Expert Solution
Computation of Cost to be allocated in the first-stage allocation to the Customer Support Activity cost pool:
Manufacturing Overheads = $600,000 * 0.50 = $300,000
Selling and Administrative expenses = $300,000 * 0.45 = $135,000
Total customer Support Activity Cost Pool = $300,000 + $135,000 = $435,000
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