Question

Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Activity Rates Supporting direct labor $ 10.00 per direct labor-hour Machine processing $ 3.00 per machine-hour Machine setups $ 40.00 per setup Production orders $ 150.00 per order Shipments $ 120.00 per shipment Product sustaining 800.00 per product Activity data have been supplied for the following two products: Total Expected Activity K425 M67 Number of units produced per year 200 2,000 Direct labor-hours 925 50 Machine-hours 3,200 40 Machine setups 15 2 Production orders 15 2 Shipments 30 2 Product sustaining 2 2 Required: Determine the total overhead cost that would be assigned to each of the products listed above in the activity-based costing system.

Answer 1

Answer:

                                   KLUMPER CORPORATION

                      TOTAL OVERHEAD COST OF K425 and M67

                                                    K425                 M67

Supporting direct labor           $9,250                 $500

Machine Processing cost          9,600                    120

Machine set-up                             600                     80

Production order                        2,250                  300

Shipment                                    3,600                   240

Product sustaining                   1,600                 1,600

                                                  26,900              2,840

Explanation:

workings

1. supporting  direct labour cost :                

K425  =  $10 * 925 = $9250

M67    =  $10* 50   = $500

2. machine processing cost

K425 = $3* 3200 = $9600

M67 = $3* 40  =   $120

3. Machine set-up cost :

K425   =  $40 * 15  = $600

M67 =  $40* 2 =  $80

4.  Production order

K425   = $150 * 15  = $2,250

M67   =  $150 * 2     =  $300

5.  Shipments cost :

 K425  =  $120*30 =  $3,600

 M67   =  $120 * 2   =  $240

6. Sustaning cost :

  K425  =  $800 * 2  = $1,600

   M67   =   $800 * 2 =  $1,600