Question

Groleau Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. Th company's overhead costs, which consist of factory utilities and indirect labor, are allocated to the cost pools in proportion to t activity cost pools' consumption of resources. Costs in the Processing cost pool are assigned to products based on machine-h (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost are not assigned to products. Data concerning the two products and the company's costs and activity-based costing system a below: Factory utilities (total) Indirect labor (total) $36,500 $11,000 Distribution of Resource Consumption Across Activity Cost Pools Factory utilities Indirect labor Processing 0.30 0.50 Setting Up 0.20 0.30 Other 0.50 0.20 Product S8 Product F1 MHS 3,600 7,600 11,200 Batches 1,500 900 2,400 Total Sales (total) Direct materials (total) Direct labor (total) Product S8 $ 70,900 $ 25, 400 $32,400 Product Fi $ 100, 100 $ 37,500 $ 44,000 Required: a. Assign overhead costs to activity cost pools using activity-based costing. b. Calculate activity rates for each activity cost pool using activity-based costing. c. Determine the amount of overhead cost that would be assigned to each product using activity-based costing. d. Determine the product margins for each product using activity-based costing.

Answer 1

a) Assign overhead cost

	Processing	Setting up	Other	Total
Factory utilities	10950	7300	18250	36500
Indirect labor	5500	3300	2200	11000
Total	16450	10600	20450	47500

b) Overhead rate

	Overhead rate
Processing	16450/11200 = 1.47 per MH
Setting up	10600/2400 = 4.42 per Batch

c) Amount of overhead

	Product S8	Product F1
Processing	5292	11172
Setting up	6630	3978
Total	11922	15150

d) Product margin

	Product S8	Product F1
Sales	70900	100100
Direct material	25400	37500
Direct labor	32400	44000
Overhead	11922	15150
Product margin	1178	3450