Use the following information about Riley\'s Rewards to allocate cost using ABC

Question

Use the following information about Riley's Rewards to allocate cost using ABC rate.

Forming Deptment

Finishing

How much cost would be assigned to Trophies if set up cost in each department were allocated by number of setups and indirect labor cost was allocated in each depratment based on the department direct labor costs?

ans: 27,084   <-----how did they get the answer?  Thanks

Trophies Plaques Total Direct material 12,500 11,175 23,675 Direct Labor 15,000 9,000 24,000 Indirect costs setup costs 50 setups 40 setups 10,000 indirect labor 9,000

Explanation / Answer

Hi,

Please find the answer as followsL

Forming Department

Setup Cost Allocation = 10000*50/90 = 5555.56

Indirect Cost Allocation = 9000*15000/24000 = 5625

Finishing Department

Setup Cost Allocation = 24000*80/170 = 11294.12

Indirect Cost Allocation = 11000*8800/21000 = 4609.52

Total Cost Allocated = 5555.56 + 5625 + 11294.12 + 4609.52 = 27084.2 or 27084

Answer is 27084

Thanks.

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