Question

Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates:

Activity Cost Pool	Activity Rates
Supporting direct labor	$	8	per direct labor-hour
Machine processing	$	5	per machine-hour
Machine setups	$	35	per setup
Production orders	$	160	per order
Shipments	$	110	per shipment
Product sustaining	$	850	per product

Activity data have been supplied for the following two products:

	Total Expected Activity
	K425	M67
Number of units produced per year	200	2,000
Direct labor-hours	1,175	50
Machine-hours	3,400	40
Machine setups	19	3
Production orders	19	3
Shipments	38	3
Product sustaining	3	3

Required:

How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

K425 M67 Activity Cost Pool Supporting direct labor Machine processing Machine setups Production orders Shipments Product sustaining Total overhead cost

Answer 1

Activity cost pool	Activity rates (i)	Total Expected Activity		Overheads allocated to K425 (i) x (ii)	Overheads allocated to M67 (i) x (iii)
		K425 (ii)	M67 (iii)
Direct labor-hours	$8 per direct labor-hour	1,175	50	9,400	400
Machine-hours	$5 per machine-hour	3,400	40	17,000	200
Machine setups	$35 per setup	19	3	665	105
Production orders	$160 per order	19	3	3,040	480
Shipments	$110 per shipment	38	3	4,180	330
Product sustaining	$850 per product	3	3	2,550	2,550
Total overhead costs				$36,835	$4,065

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