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	$	28,000
Supervisory expense	$	14,100

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.

Activity:

	MHs (Machining)	Orders (Order Filling)
Product W1	5,750	177
Product M0	21,600	960
Total	27,350	1,137

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)	$	63,800	$	65,200
Direct materials (total)	$	31,500	$	16,100
Direct labor (total)	$	19,300	$	31,300

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.)

Multiple Choice

• $21,050

• $6,174

• $4,428

• $1,747

Answer 1

a		Activity cost pools
		Machining	Order filling	Other	Total
	Equipment Depreciation	$14,000	$8,400	$5,600	$28,000
	Supervisory expenses	$7,050	$2,820	$4,230	$14,100
	Total	$21,050	$11,220	$9,830	$42,100
b	Activity cost pools	Activity Rate
	Machining($21,050/27,350 hours)	0.77	per MH
	Order filling($11,220/1,137 orders)	9.87	per order
c		Amount of Overhead Cost
	Product W1	$6,174
	Product M0	$26,098
	So Option B is answer