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

question 19

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 overhead allocated to Dept. 2 using activity-based costing. $$\begin{array} { l c c } & \text { Direct Labor Hours } & \text { Machine Hours } \\\text { Operating Dept. 1 } & 980 & 9,200 \\\text { Operating Dept. 2 } & 2,100 & 6,000 \\\text { Totals } & 3,080 & 15,200 \\ & & \\\text { Factory overhead costs } & & \\\text { Rent and utilities } & & \$ 21,700 \\\text { Indirect labor } & & 17,300\\\text { Depreciation - Equipment } & &14,000 \\\end{array}$$ Total factory overhead $ 53,000

• A) $11,795.
• B) $14,092.
• C) $25,887.
• D) $27,112.
• E) $26,500.

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Definitions:

Estimated Time

The approximation of the time required to complete a specific task or project.

Underapplied Manufacturing Overhead

Occurs when the allocated manufacturing overhead costs are less than the actual overhead costs incurred, resulting in a cost variance.

Prorated

Dividing or allocating amounts proportionally based on specific metrics or criteria, often used in billing and cost sharing.

Overapplied Manufacturing Overhead

A situation where the allocated manufacturing overhead cost is greater than the actual overhead incurred.