Question

Derde 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 Fling, and Other-based on resource consumption Data to perform these allocations appear below Overhead costs Equipment depreciation Supervisory expense $51.000 $11,300 Distribution of Resource Consumption Across Activity Cost Pools Equipent depreciation Supervisory expense aching 0.50 2.50 Activity Cost Pools Order Filling 0.20 0.10 In the second stage. Machining costs are assigned to products using machine hours (M not assigned to products ) and Order Feing costs are assigned to products using the number of orders. The costs in the other active cost pool are Activity Orders (Order Filling) Product W Product Me (Machining 5,630 18,600 24,230 1.180 Finally, sales and direct cost data are combined with Machining and Ordering costs to determine product margins

Answer 1

First stage allocation:

	Activity Cost Pools			Total
	Machining	Order Filling	Other
Equipment depreciation	25500	10200	15300	51000
Supervisory expense	5650	1130	4520	11300
Total $	31150	11330	19820	62300

Second stage allocation:

Activity Cost Pool	Activity Cost $	Total Cost Driver Usage		Activity Rate $
Machining	31150	24230	MH	1.29	per MH
Order Filling	11330	1180	Orders	9.60	per Order
Total	42480

Overhead cost assigned to Product W1:

Activity Cost Pool	Activity Rate $	Cost Driver Usage	Overhead Cost Assigned $
Machining	1.29	5630	7263
Order Filling	9.60	199	1910
Total			9173

Answer: $9,173