Question

Feldpausch Corporation has provided the following data from its activity-based costing system: Activity Cost PoolTotal CostTotal Activity Assembly$1,506,48462,200machine-hours Processing orders$70,5472,310orders Inspection$116,2191,630inspection-hours The company makes 1,210 units of product W26B a year, requiring a total of 1,950 machine-hours, 87 orders, and 38 inspection-hours per year. The product's direct materials cost is $52.44 per unit and its direct labor cost is $19.38 per unit. The product sells for $122.40 per unit. According to the activity-based costing system, the product margin for product W26B is: (Round your intermediate calculations and final answers to 2 decimal places.) Multiple Choice a. $8,606.42 b. $61,201.80 c. $11,315.82 d. $11,263.40

Answer 1

Answer:

a. $8,606.42

Explanation:

The computation of the product margin for product W26B is shown below:

But before that first we have to find out the activity rate which is

Activity rate = Respective cost ÷ Respective activity

For Assembly, it is

= $1,506,484 ÷ 62,200

= $24.22 per machine hour

For Processing order it is

= $70,547 ÷ 2,310

= $30.54 per order

For Inspection it is

= $116,219 ÷ 1,630

= $71.3 per inspection hour

Now total applied cost is

= ($24.22 × 1,950) + ($30.54 × 87) + ($71.3 × 38)

= $52,595.38

Add: Direct materials cost =($52.44 × 1,210 units) = $63,452.4

Add: Direct labor cost = ($19.38 × 1,210 units) = $23,449.8

So,

Total cost = $139,497.58

Now

Total sales value = 1,210 units × 122.4 = $148,104

So,

Product margin is

= $148,104 - $139,497.58

= $8,606.42