Question

Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity based

Answer 1

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      20, 705   1, 460

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         20, 705

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         1, 460