Question

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts equipment depreciation and supervisory expense to three activity cost pools-Machining Order Filling, and Other-based on resource consumption Data to perform these allocations appear below: Overhead costs Equipment depreciation Supervisory expense $88,000 $12,700 Distribution of Resource Consumption Across Activity Cost Pools: Equipment depreciation Supervisory expense Activity Cost Pools Machining Order Filling 0.50 9.30 0.5e 0.29 Other @.20 0.30 In the second stage, Machining costs are assigned to products using machine hours (MHS) and Order Filing costs are assigned to products using the number of orders. The costs in the other activity cost pool are not assigned to products

Answer 1

Calculation of Product margin of Product W1 Sales $73,000 Less: Direct material (37,900) Direct Labor (16,300) Overheads (16,926) Profit Margin $1,874 Other Working Note: Distribution of Resource Consumption Across Activities Machining Order Filling Equipment Depreciation $44,000 $26,400 Supervisory Expense $6,350 $2,540 Total $50,350 $28,940 $17,600 $3,810 $21,410 Working Note: Machining Order Filling Other Equipment Depreciation 0.50 * $88,000 $44,000 0.30 * $88,000 $26,400 0.20 * $88,000 $17,600 Supervisory Expense 0.50 * $12,700 $6,350 0.20 * $12,700 $2,540 0.30 * $12,700 $3,810 Activity Rate Activity Cost Pool Equipment Depreciation Supervisory Expense $50,350 / 21,340 $28,940/ 1,065 per machine $2.36 hour $27.15 per order Overheads Allocated to Product W1 hour Equipment 5,540 * $2.36 per machine Depreciation Supervisory Expense 142 * $27.15 per order Total Overheads $13,071 $3,855 $16,926