Answer:
K425 = $20, 705
M67 = $1, 460
Explanation:
Overhead costs are costs on the income statement that exclude direct labor, direct materials and any other direct expenses. These costs are costs that are incurred indirectly, but are necessary for production. These include any advertising, insurance, rent, maintenance, repairs, telephone bills, supplies, utilities, taxes, etc.
Determine the total overhead cost that would be assigned to each of the products listed above in the activity-based costing system.
Activity Cost Pool K425 M67
Supporting direct labor ($) 10, 250 ($) 300
Machine processing 6, 600 60
Machine set-ups 350 50
Production orders 1, 120 160
Shipments 1, 610 115
Product sustaining 775 775
Total overhead cost <u>20, 705</u> <u>1, 460
</u>
Below are the workings for each product, to determine how we arrive at each amount.
Activity cost pool Activity rate Activity ABC cost ($)
K425
Supporting direct labor $10 per direct labor hour 1, 025 10, 250
Machine processing $3 per machine hour 2, 200 6, 600
Machine set-ups $50 per set-up 7 350
Production orders $160 per order 7 1, 120
Shipments $115 per shipment 14 1, 610
Product sustaining $775 per product 1 775
Total Overhead cost <u>20, 705
</u>
Activity cost pool Activity rate Activity ABC cost ($)
M67
Supporting direct labor $10 per direct labor hour 30 300
Machine processing $3 per machine hour 20 60
Machine set-ups $50 per set-up 1 50
Production orders $160 per order 1 160
Shipments $115 per shipment 1 115
Product sustaining $775 per product 1 775
Total Overhead cost <u>1, 460
</u>
