Activity Cost Accounting Need Help

Question

Queens Corporation uses an activity based costing system with three activity cost pools. The company has provided the following data concerning its costs :
Costs :

Wages and Salaries : $480,000

Depreciation : $160,000

Utilities : $120,000

Total : 760,000

The distribution of resource consumption across three pools is given below :

Wages and Salaries : Fabricating : 35% Processing : 40% Other : 25% Total 100%

Depreciation : Fabricating : 15% Processing : 40% Other : 45% Total : 100%

Utilities : Fabricating : 10% Processing : 50% Other : 40% Total : 100%

 

Question : How much cost, in total, would be allocated to Fabricating Activity Cost Pool?

A) $168,000 B) $266,000 C) $114,000 D) $204,000 E) $76,000

 

Answer was D) but I need help with steps as to why.

Answer 1

The question is in regards to first stage allocation of ABC Costing. For first stage allocation, the goal is to allocate cost from the manufacturing overhead general ledger accounts to various activity cost pools. This is accomplished by multiplying the estimated manufacturing overhead amounts by the % used by the activity cost pools. For this problem, we need to multiply the estimated manufacturing overhead amounts by the % used by the Fabricating activity cost pool and then total those amounts. Please see below.

Wages and Salaries of $480,000 x Fabricating % of 35% = $168,000

+ Depreciation of $160,000 x Fabricating % of 15% = $24,000

+ Utilities of $120,000 x Fabricating % of 10% = $12,000

= $168,000 + $24,000 + $12,000 = $204,000