Question

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below:
Overhead costs:

Equipment depreciation $88,000
Supervisory expense $12,700

Distribution of Resource Consumption Across Activity Cost Pools:
Activity Cost Pools
Machining Order Filling Other
Equipment depreciation 0.50 0.30 0.20
Supervisory expense 0.50 0.20 0.30

In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.

MHs (Machining) Orders (Order Filling)
Product W1 5,540 142
Product M0 15,800 924
Total 21,340 1,066

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

Sales and Direct Cost Data:

Product W1 Product M0
Sales (total) $73,000 $63,800
Direct materials (total) $37,900 $19,600
Direct labor (total) $16,300 $35,100

What is the overhead cost assigned to Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places and your final answer to nearest whole dollar amount.)

a. $13,074
b. $50,350
c. $16,930
d. $3,855

Answer 1

Answer:

c. $16,930

Explanation:

We determiantes teh rates per activity first:

$\left[\begin{array}{ccccc} Activity& Driver& cost& Total& Rate\\ Machinning& Machine Hours&50,350&21,340&2.36\\ Filling& Orders&28,940&1,066&27.15\\Other&&21,410&0&0\\\end{array}\right]$

Now, we apply this rate into the product:

5,540 machine hours x 2.36 activity rate = 13.074,4‬

   142 orders x 27.15 activity rate = 3.855,3‬

Total: 16.929,7‬

we round for the nearest dollar $16,930