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. Equipment depreciation Indirect labor Total Activity Cost Pools Machining Setting Up Other $11,200 $ 53,200 $ 25,600 7,200 3,800 5,000 $18,400 $ 57,000 $30,600 Total $ 90,000 16,000 $ 106,000 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: Product 23 Product T1 Total MHS 6,900 7,100 14,000 Batches 1,200 1,800 3,000 Sales (total) Direct materials (total) Direct labor (total) Product Z3 Product T1 $248,800 $264,500 $ 88,500 $ 99,400 $111,800 $109,700 Required: a. Calculate activity rates for each activity cost pool using activity-based costing. b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing. c. Determine the product margins for each product using activity-based costing. Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate activity rates for each activity cost pool using activity-based costing. (Round your answers to 2 decimal places.) Activity Cost Pools Machining Setting up Activity Rate per MH per batch

Answer 1

A) Activity Cost Pool Machining Setting Up Cost Driver MHS Batches Activity Cost $18,400 $57,000 Volume 14,000 3,000 Activity Rate $1.31 ($18400 / 14000] $19.00 [$57000 / 3000] B) Activity Activity costs assigned to Product 23: Activity Rate Usage Machining $1.31 6,900 Setting Up $19.00 1,200 Activity costs assigned to Product Z3: Activity Cost $9,039 ($1.31 x 6900] $22,800 ($19 x 1200] $31,839 Activity Activity costs assigned to Product T1: Activity Rate Usage Machining $1.317,100 Setting Up $19.00 1,800 Activity costs assigned to Product T1: Activity Cost $9,301 ($1.31 x 7100] $34,200 ($19 x 1800] $43,501 Product Z3 Product T1 $248,800 $264,500 Sales Less: Direct materials Direct labor Activity costs assigned Worley's customer margin, dollars $88,500 $111,800 $31,839 $16,661 $99,400 $109,700 $43,501 [As calculated in Part-B] $11,899