Question

Howell Corporation's activity-based costing system has three activity cost pools--Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources.

Equipment depreciation (total)	$	27,200
Indirect labor (total)	$	7,840

Distribution of Resource Consumption Across Activity Cost Pools

	Machining	Setting Up	Other
Equipment depreciation	0.40	0.30	0.30
Indirect labor	0.40	0.30	0.30

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.

	MHs	Batches
Product S4	13,200	400
Product C0	7,000	1,200
Total	20,200	1,600

Additional data concerning the company's products appears below:

	Product S4			Product C0
Sales (total)	$	81,400		$	81,500
Direct materials (total)	$	27,000		$	28,400
Direct labor (total)	$	37,100		$	32,600

Required:

a. Assign overhead costs to activity cost pools using activity-based costing.

b. Calculate activity rates for each activity cost pool using activity-based costing.

c. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.

d. Determine the product margins for each product using activity-based costing.

Assign overhead costs to activity cost pools using activity-based costing.

	Activity Cost Pools Machining Setting Up Other Total Equipment depreciation Indirect labor Total

Calculate activity rates for each activity cost pool using activity-based costing. (Round your answers to 2 decimal places.)

	Activity Cost Pools Activity Rate Machining per MH Setting up per batch

Determine the amount of overhead cost that would be assigned to each product using activity-based costing. (Round intermediate calculations to 2 decimal places.)

	Amount of Overhead Cost Product S4 Product C0

Determine the product margins for each product using activity-based costing. (Round intermediate calculations to 2 decimal places.)

	Product Margin Product S4 Product C0

Answer 1

a)	Particulars	Machining	Setting Up	Other	Total
	Equipment depreciation	$ 10,880.00	$   8,160.00	$   8,160.00	$ 27,200.00
	Indirect labor	$   3,136.00	$   2,352.00	$   2,352.00	$   7,840.00
	Total	$ 14,016.00	$ 10,512.00	$ 10,512.00	$ 35,040.00

b)	Activity Cost pools			Activity Rate
	Machining			$      0.69	per MH	($ 14016 / 20200)
	Setting up			$      6.57	per batch	($ 10512 / 1600)
				$      7.26

c)	Particulars
			OH
	Product S4		$ 11,786.97	[($ 0.69 x 13200) + ($ 6.57 x 400)]
	Product C0		$ 12,741.03	[($ 0.69 x 7000) + ($ 6.57 x 1200)]
			$ 24,528.00

d)	Particulars		Product S4		Product C0
	Sales		$ 81,400.00		$ 81,500.00
Less:	Costs
	Direct Materials		$ 27,000.00		$ 28,400.00
	Direct Labor		$ 37,100.00		$ 32,600.00
	OH		$ 11,786.97		$ 12,741.03
			$   5,513.03		$   7,758.97

Note: There might be some differences in the answer because of decimals. Just let me know if you find any answer incorrect