Question

Greife Corporation's activity-based costing system has three activity cost pools --Machining, Setting Up, and Other. The company's overhead costs have already been allocated to these cost pools as follows: Machining Setting Up Other $ 47,300 $100,738 $ 16,500 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. The following table shows the machine-hours and number of batches associated with each of the company's two products: Product KO Product W9 Total MHS Batches 2,900 960 B.100 1.130 11,000 2,090 Additional data concerning the company's products appears below: Sales (total) Direct materials (total) Direct Labor (total) Product KO Product W9 $262,500 $253,000 $81,900 S 92,100 $ 94,100 $ 65,400 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 mestinn hy entering Your answers in the tabs below.

Answer 1

1 Solution : 2 a. Calculation of Activity rates for each activity cost pool:- 4 Activity Rate = Total Overhead ( Related to cost driver) / Cost Driver 6 Activity Cost pool 7 Machining Annual Costs (A) Driver (B) Activity Rate (A/B) $47,300 11000 Machine hours 47300 / 11000 = $4.3 per machine hour 9 Setting Up $100,738 2090 Batches 100738 / 2090 = $ 48.2 per Batch

KO 1 b. Calculation of overhead costs that would be assigned to each product based on activity based costing 2 Activity Cost Pool W9 3 Machining (A) $12,470 $34,830 (2900 Machine Hrs * $ 4.3 per hr) (8100 Machine Hrs * $ 4.3 per hr) 6 Setting up (B) $46,272 (960 Batches * $ 48.2 per batch) $54,466 (1130 Batches * $ 48.2 per batch) 00 9 Total Overhead Costs (A+B) $58,742 $89,296 w Now

19 C. Calculation of product margins for each product using Activity Based costing system :- KO W9 21 Particulars 22 Sales $262,500 $253,000 24 Less: 25 Direct material Costs 26 Direct Labour Costs 27 Overhead Costs ($81,900) ($94,100) ($58,742) ($92,100) ($65,400) ($89,296) 29 Product margins $27,758 $6,204