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.

MUSILI Corporation has an aluvily-baseu Cung system with Tee aliviLy Cost POUS-Maching, Selling up, and other. The cornparty's Overhead costs, which conSSLO table below equipment depreciation and indirect Tabor,Have been allocated to the cost pools already and are provided in the Activity Cost Pools Machining Setting us ather Total Equipment Depreciation Indirect labor $ 9200 $ 48,200 $ 23,600 $ 31,000 4200 2900 4000 11,000 $ 13,400 $ 51.000 5 27.500 $ 92.000 Tatal Casts in the Machining cost pool are assigned to products based on machine-hours MHs) and costs in the Setting Up Cost pool are assipned to products based on the number of batches, Costs in the other cost pool are not assiered to products. Data concerning the two products and the company's costs appear below. MHS Batches Product 23 5900 6100 700 1300 Product 11 Total 12,000 2000 Product T1 Sales (total) Direct materials (total) Direct labor (total) Product 3 $ 228,800 $ 254,500 $ 83,500 $ 97,400 $ 109,800 $ 104,700 Required: Cakulate the follcavine Machining Acty Rate Setting up Activity Rate Amount of OH applied to product 23 (round to the nearest dollar Armount of OH applied to product T1 (round to the nearest dollar Product Margin- nearest dollar round ta the Product Margin-T1 round to the

Activity Cost Pools

1.Machining 2.Setting Up 3.Other 4.Total

Equipment depreciation 1.$ 9200 2.$ 48,200 3.$ 23,600 4.$ 81,000

Indirect labor 1. 4200 2. 2800 3. 4000 4. 11,000

Total 1.$ 13,400 2.$ 51,000 3.$ 27,600 4.$ 92,000

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:

1. MHs 2.Batches

Product Z3 1. 5900 2. 700

Product T1 1. 6100 2. 1300

Total 1. 12,000 2. 2000

1. Product Z3 2. Product T1

Sales (total) 1. $ 228,800 2. $ 254,500

Direct materials (total) 1. $ 83,500 2. $ 97,400

Direct labor (total) 1. $ 109,800 2. $ 104,700

Required: Calculate the following:

1)Machining Activity Rate $

2)Setting up Activity Rate $

3) Amount of OH applied to product Z3 (round to the nearest dollar) $

4)Amount of OH applied to product T1 (round to the nearest dollar) $

5)Product Margin – Z3 (round to the nearest dollar) $

6)Product Margin – T1 (round to the nearest dollar) $

Answer 1

1) Machining Activity Rate= Total cost of machining/Total machine hours

= $13400/12000= $1.12 per machine hour

2) Setting up Activity Rate= Total cost of setting up/Total batches

= $51000/2000= $25.5 per batch

3)

	Product Z3
Machining costs (5900*$1.12)	$6608
Setting up costs (700*$25.5)	17850
Total amount of OH applied to product Z3	$24458

4)

	Product T1
Machining costs (6100*$1.12)	$6832
Setting up costs (1300*$25.5)	33150
Total amount of OH applied to product T1	$39982

5)

Sales		$228800
Less: Costs
Direct materials	$83500
Direct labor	109800
Overhead applied	24458
Total costs		217758
Product margin		$11042

6)

Sales		$254500
Less: Costs
Direct materials	$97400
Direct labor	104700
Overhead applied	39982
Total costs		242082
Product margin		$12418