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Activity Based Costing - Second Stage Allocation

Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates:

Activity Cost Pool Activity Rates
Supporting direct labor.................................. $7.00 per direct labor-hour
Machine processing....................................... $3.00 per machine-hour
Machine setups............................................ $40.00 per setup
Production orders.......................................... $160.00 per order
Shipments..................................................... $120.00 per shipment
Product sustaining.................... $800 per product

Activity data have been supplied for the following products:

Total Expected Activity
J78 W52
Direct labor-hours......................................... 1,000 40
Machine hours.................................. 3,200 30
Machine setups....................................... 5 1
Production orders.......................................... 5 1
Shipments.................................................... 10 1
Product sustaining.................... 5 1

Required:
Determine the total overhead cost that would be assigned to each of the products listed above in the activity-based costing system.

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Solution Summary

The solution explains the overhead allocation using activity based costing

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