Question

Zwahlen Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other Costs in the Processing 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 and activity-based costing system appear below. Activity Cost Pools Processing Setting Up Other $58,600 $16.900 $29.900 Product D7 Product HO MHS 9,400 13.400 22,800 Batches 900 1.500 2,400 Total Sales (total) Direct materials (total) Direct labor (total) Product D7Product HO $ 222,300 $ 308,100 $ 74,000 $ 146,600 $ 106,540 $ 97,600 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.

Answer 1

- Answer 9. Gholation of Activity Rates for each activity cost pool Activity Rales - Activity cost of cost pools Number of machine Hours / Bytches Process) $ 58600 22800 Machine Homes ts = 257 per Machine Hoyv Setting Up : & 16900 = 7.04 per Batch, 2400 Batches b. Glulation of overhead costo assigned to each overhead Cost Assigner - Processing to each product overhead Cost product setting Up Overhead Cost Product 07 Product Ho - (9400 Machine Hayes x $ 2-57) + (900 Butches x $ 7.04) • $24160 + 6338 $ 30998 . (13400 Machine Hoyt5 * $2.57) + (1300 Butches * $7.04) F 34440 + 10562 = $45002 = I C. Roduct Margins of each product Schedule of Rofit margin Particulars Product D7 Product to sales 222300 308100 - Direct Material (74000) |(146600) - Direct Labour (108540) |(97600) -; Overheads Proces 5703 (24160) 64440) setting up (6338) (10562) Profit margin 18898 11262