Question

Musich Corporation has an activity-based costing system with three activity cost pools--Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, have been allocated to the cost pools already and are provided in the table below.

                                                               Activity Cost Pools

	Machining		Setting Up			Other			Total
Equipment depreciation	$	9000		$	47,700		$	23,400		$	80,100
Indirect labor		3900			2700			3900			10,500
Total	$	12,900		$	50,400		$	27,300		$	90,600

Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company's costs appear below:

	MHs	Batches
Product Z3	5800	650
Product T1	6000	1250
Total	11,800	1900

                                                                                        Product Z3      Product T1

Sales (total)	$	226,800	$	253,500
Direct materials (total)	$	83,000	$	97,200
Direct labor (total)	$	109,600	$	104,200

Required:

Calculate the following:

Machining Activity Rate	$
Setting up Activity Rate	$
Amount of OH applied to product Z3 (round to the nearest dollar)	$
Amount of OH applied to product T1 (round to the nearest dollar)	$
Product Margin – Z3 (round to the nearest dollar)	$
Product Margin – T1 (round to the nearest dollar)	$

Answer 1

Solutions:

E Н K N 3 SOLUTION 1: 4. Computation of Activity rates Cost assigned Total activity level $12,900 Activity rate $1.09 5 Cost Pool Machining Setting up Other 6 11800 $50,400 $26.53 7 1900 $27,300 No allocation 8 9 Total $90,600 10 11 12 SOLUTION 2: 13 Computation of Overhead assigned to products 14 Product Z3 Product T1 Activity level Activity level used Activity rate Cost assigned Cost assigned Activity cost pool 15 Activity rate used 5800 Machining Setting up $6,341 $6,559 16 1.09 6000 1.09 $17,242 $33,158 17 650 26.53 1250 26.53 18 $39,717 Total Overhead cost assigned $23,583 19 20 21 SOLUTION 3: 22 Computation of Product Margins Product T1 23 Product Z3 $226,800 Sales $253,500 24 Less: Costs 25 Direct Materials $83,000 $97,200 26 Direct labor Overhead Costs $109,600 $104,200 27 $23,583 $39,717 28 Product Margins $10,617 $12,383 29 30 31 Sheet26 (26) Sheet146 (11) Sheet26 (22) Sheet26 (27) Sheet262 Sheet242 Sheet243 et150 ПI