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	Activity Rates
Supporting direct labor	$	8	per direct labor-hour
Machine processing	$	4	per machine-hour
Machine setups	$	50	per setup
Production orders	$	170	per order
Shipments	$	125	per shipment
Product sustaining	$	825	per product

Activity data have been supplied for the following two products:

	Total Expected Activity
	K425	M67
Number of units produced per year	200	2,000
Direct labor-hours	1,125	50
Machine-hours	2,800	40
Machine setups	19	2
Production orders	19	2
Shipments	38	2
Product sustaining	2	2

Required:

How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

	Activity Cost Pool K425 M67 Supporting direct labor Machine processing Machine setups Production orders Shipments Product sustaining Total overhead cost

Answer 1

Solution: Direct labor-hours Machine-hours Machine setups Production orders Shipments Product sustaining Total overhead cost Activity Rates Total Expected Activityl Cost assigned K425 M67 K425 M67 b c d=a*b le=a*c 81,125 50 9000 400 42,800 40 11200 160 50 19 21 950 100 2 3230 340 125 38 21 4750 250 825 1650 1650 30780 2900 1701