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 $10,600 $ 51,700 $25,000 6,300 3,500 4,700 $16,900 $ 55,200 $ 29,700 Total $ 87,300 14,500 $101,800 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 Z3 Product Tl MS 6,600 6,800 13,400 Batches 1,050 1,650 2,700 Total Sales (total) Direct materials (total) Direct labor (total) Product Z3 Product T1 $242,800 $261,500 $ 87,000 $98.800 $111,200 $108,200 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 the nectinn hu enterinn nur answers in the tahs heinw

Answer 1

a) Determination of Activity rates for each activity :- Estimated Activity Cost Estimated Activity Rate Overhead Cost driver Pool Machining 13,400 1.2612 16,900 Setting Up 55,200 2,700 20.4444 b) Determination of Amount of overhead cost assigned using Activity rates :- Overhead Overhead Activity Cost Product Z3 Product T1 Activity Rate allocated to allocated to Pool Cost driver Cost driver Product Z3 Product T1 Machining 6,800 1.2612 6,600 8,323.88 8,576.12 20.4444 1,650 Setting Up 1,050 21,466.67 33,733.33 Overhead assigned 29,790.55 42,309.45 c) Determination of Product margins for each product :- Particulars Product Z3 Product T1 Sales revenue 242,800 261,500 Less: Costs Direct materials 87,000 98,800 Direct labor 111,200 108,200 Overhead 42,309 29,791 Total costs 227,991 249,309 Product margins 14,809 12,191