Question

Howell Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Equipment depreciation (total) Indirect labor (total) $32,900 $ 7,460 Distribution of Resource Consumption Across Activity Cost Pools Equipment depreciation Indirect labor Machining 0.30 0.40 Setting Up Other 0.40 0.30 0.20 0.40 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. Product S4 Product Co Total MHS 10,800 5,900 16,700 Batches 100 1,500 1,600 Additional data concerning the company's products appears below: Sales (total) Direct materials (total) Direct labor (total) Product S4 $78,300 $ 25,000 $36,700 Product Co $ 74,500 $ 25,100 $ 25, 200

Answer 1

1) Assign overhead cost

	Machining	Setting up	Other	Total
Equipment depreciation	9870	13160	9870	32900
Indirect labor	2984	1492	2984	7460
Total	12854	14652	12854	40360

2) Activity rate

Activity	Estimated cost	Estimated activity	Activity rate
machining	12854	16700	0.77 per MH
Setting up	14652	1600	9.16 per batch

3) Overhead assigned to each product

	Product S4	Product C0
Machining	8316	4543
Setting up	916	13740
Total overhead	9232	18283

4) Product margin

	Product S4	Product C0
Sales	78300	74500
Direct material	25000	25100
Direct labor	36700	25200
Overhead	9232	18283
Product margin	7368	5917