Chapter 5 Activity Based Costing Licensed Gear Co. manufactures and sells college athletic fan gear and uses activity-based costing for overhead costs. Licensed Gear Co. supplied the following financial information concerning its overhead costs and the activity based costing system in 2020: Overhead costs: Distribution of resource consumption: The amount of activity for the year is as follows: How much OVERHEAD cost would be allocated to Cyclone Tailgaters, a customer who initiated 20 orders and 5 custom designs in 2020

Question Completion:

Overhead costs:

Wages & salaries $ 925,000

Factory depreciation  125,000

Marketing department expenses 330,000

Total $ 1,380,000

Distribution of resource consumption:

                                                   Activity Cost Pools

                                        Customer       Product         Others   Total

                                         Orders          Designs

Wages & salaries               42%                46%               12%      100%

Factory depreciation         53%                33%                14%      100%

Marketing

department expenses     41%                 34%                  5        100%

The amount of activity for the year is as follows:

Cost Pool                 Activity

Customer Orders   2,125 Orders

Product Designs       325 Designs

Licensed Gear Co.

The Overhead cost allocated to Cyclone Tailgaters is:

=  $15,475.70

Explanation:

a) Data and Calculations:

Distribution of resource consumption:

                                                   Activity Cost Pools

                                        Customer       Product         Others   Total

                                         Orders          Designs

Wages & salaries               42%                46%               12%      100%

Factory depreciation         53%                33%                14%      100%

Marketing

department expenses     41%                 54%                  5        100%

Activity Cost Pools:      Wages          Factory   Marketing        Total

                                    & salaries       Dept.        Dept.  

Customer orders        $388,500     $66,250   $135,300     $590,050

Product Designs           425,500        41,250      178,200       644,950

Others                             111,000         17,500       16,500        145,000

Total                           $925,000   $125,000   $330,000  $1,380,000

Overhead rates:        Amount        Activity            Overhead Rates

Customer orders     $590,050     2,125 Orders          $277.67

Product Designs      $644,950        325 Designs     $1,984.46

Cyclone Tailgaters  Activity   Overhead Rate    Allocated Overhead

Customer orders       20          $277.67                  $5,553.40

Product designs          5        $1,984.46                  $9,922.30

Total overhead costs allocated to Cyclone           $15,475.70