White Manufacturing Company its operation pass through two
departments its cost as following:
Direct Material
Direct Labor
Overhead Costs:
Overhead Costs is allocated for department using Direct Labor Cost
The company started to refine its costing system by moving from
simple costing to Activity Based Costing System (ABC)
therefore Overhead Costs divided to:
Setup Cost is allocated to setup hours
Production Cost is allocated to Direct Labor Hours
Packaging Cost is allocated to Direct Labor Cost
Total Overhead Cost
Setup Hours:
Labor Hours
Labor Cost
Department 1
Department 2
Total
$100,000
$150,000
$250,000
$80,000
$120,000
$200,000
$500,000
$170,000
$180,000
$150,000
$500,000
60
40
100
250
150
400
$80,000
$120,000
$200,000
Allocate OH Cost using Simple Costing System for Department 2
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Total Manufacturing Cost using Simple Costing for Department 2
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Allocate Setup Cost for Department 2
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Allocate Production Cost for Department 2
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Allocate Packaging Cost for Department 2
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Total Manufacturing Cost using ABC for Department 2
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