The Rockmart Construction Company delivers dirt and stone from local quarries to its construction...
Question:
The Rockmart Construction Company delivers dirt and stone from local quarries to its construction sites. A new truck that was purchased for a cost of $118,000 at the beginning of the year was expected to deliver 118,000 tons over Its useful life.
The following Is a breakdown of the tons delivered during the year to each construction site:
| Construction Sites | A | B | C | D |
| Tons Delivered | 1,800 | 3,300 | 3,800 | 1,300 |
How much truck depreciation should be allocated to Site D?
a. $15,039
b. $1,300
c. $1,180
d. None of the above answers are correct.
Overhead Allocation:
Overhead costs cannot be traced to the units produced physically and it is therefore allocated using overhead allocation rates. These rates should be relevant to the way in which the overhead is incurred.
Answer and Explanation: 1
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The correct option is b. $1,300 .
We must calculate the depreciation rate for the new truck and then apply that to the tons delivered to...
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Allocating Overhead in Activity-Based Costing Systems
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Chapter 7 / Lesson 5
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Overhead in activity-based costing systems is determined by including all the different actions taken in production. See the formula used to calculate overhead in this method demonstrated through two example scenarios.
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