The Following Is Taken from Clausen Company's Internal Records of Its

question 30

Multiple Choice

The following is taken from Clausen Company's internal records of its factory with two operating departments. The cost driver for indirect labor is direct labor hours, and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of indirect labor allocated to Dept. 2 using activity-based costing. $$\begin{array} { l c r } & \text { Direct Labor Hours } & \text { Machine Hours } \\\text { Operating Dept. 1 } & 980 & 9,200 \\\text { Operating Dept. 2 } & 2,100 & 6,000 \\\text { Totals } & 3,080 & 15,200 \\& & \\\text { Factory overhead costs } & &\\\text { Rent and utilities } & & \$ 21,700 \\ \text { Indirect labor } & & 17,300\\\text { Depreciation - Equipment } & &14,000\\\text { Total factory overhead }&& \$ 53,000\end{array}$$

• A) $13,134.
• B) $8,566.
• C) $5,505.
• D) $11,795.
• E) $8,474.

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Definitions:

Prices

The monetary value assigned to goods and services, determining how much consumers need to pay to obtain them.

Production

The process of creating goods or services by combining various inputs like labor, materials, and technology.

Price L

A specific notation used to denote a certain price level in economic models or discussions.

Factor Prices

The costs associated with the inputs used in production, such as labor wages and capital rental rates.