Question

Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Machine processing Machine setups Production orders Shipments Product sustaining Activity Rates 6 per direct labor-hour $ 2 per machine-hour $ 40 per setup $ 170 per order $ 120 per shipment $ 875 per product Activity data have been supplied for the following two products: Total Expected Activity M67 2,000 40 30 K425 Number of units produced per year Direct labor-hours Machine-hours Machine setups Production orders 200 1,150 2,400 9 2 9 Shipments Product sustaining 18 2. 2 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system? Activity Cost Pool M67 K425 Supporting direct labor Machine processing Machine setups Production orders Shipments Product sustaining Total overhead cost

Answer 1

Answer

	K425	M67
Supporting Direct Labor	$6,900	$240
Machine Processing	$4,800	$60
Machine Setups	$360	$80
Production orders	$1,530	$340
Shipments	$2,160	$240
Product Sustaining	$1,750	$1,750
Total Overhead Cost	$17,500	$2,710

• Workings

	K425	M67
Supporting Direct Labor	1150 x $ 6	40 x $ 6
machine Processing	2400 x $ 2	30 x $ 2
machine Setups	9 x $ 40	2 x $ 40
Production orders	9 x $ 170	2 x $ 170
Shipments	18 x $ 120	2 x $ 120
Product Sustaining	2 x $ 875	2 x $ 875