Ollivier Corporation has an ac

Ollivier Corporation has an activity-based costing system withthree activity cost pools-Processing, Supervising, and Other. Inthe first stage allocations, costs in the two overhead accounts,equipment expense and indirect labor, are allocated to the threeactivity cost pools based on resource consumption. Data used in thefirst stage allocations follow:

  Overhead costs:
  Equipmentexpense $53,000
  Indirect labor $6,400
Distribution of Resource Consumption Across ActivityCost Pools:

Activity Cost Pools

Processing Supervising Other
  Equipmentexpense 0.50    0.40    0.10   
  Indirect labor 0.50    0.30    0.20   

Processing costs are assigned to products using machine-hours(MHs) and Supervising costs are assigned to products using thenumber of batches. The costs in the Other activity cost pool arenot assigned to products. Activity data for the company’s twoproducts follow:

MHs(Processing) Batches(Supervising)
  Product C4 16,400           1,050            
  Product L7






What is the overhead cost assigned to Product L7 underactivity-based costing? (Round your intermediatecalculations to 2 decimal places and your final answer to nearestwhole dollar.)






Calculation of The overhead cost assigned to Product L7 underactivity-based costing
Step 1
Allocation of overhead coststo Processing and Supervising activity cost pools
Overhead cost Cost allocated to processing activity Cost allocated to supervisingactivity
Equipment expense $26,500.00 $21,200.00
Indirect Labour $3,200.00 $1,920.00
Total overhead costallocated $29,700.00 $23,120.00
Step 2
Activity rate of Processingactivity cost pool = Total overhead cost allocated to processingactivity / Total no.of machine hours
Activity rate of Processingactivity cost pool = $29,700 / 17790 machine hours = $1.67 permachine hour
Activity rate of Supervisingactivity cost pool = Total overhead cost allocated to supervisingactivity / Total no.of batches
Activity rate of Supervisingactivity cost pool = $23120 / 2300 batches = $10.05 per batch
Step 3
Overhead cost assigned toProduct L7 under activity-based costing
Product L7
Processing (1390 machine hours *$1.67) $2,321
Supervising (1250 batches * $10.05) $12,563
Total Overhead cost assigned toProduct L7 $14,884
The overhead costassigned to Product L7 under activity-based costing =$14,884

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