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Solution Library
Calculate Overhead Cost Assigned To A Product
Question
Brisky 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 |
$35,000 |
|
Supervisory expense |
$15,800 |
|
Distribution of Resource Consumption Across Activity Cost Pools: |
|||
|
Activity Cost Pools |
|||
|
Machining |
Order Filling |
Other |
|
|
Equipment depreciation |
0.60 |
0.30 |
0.10 |
|
Supervisory expense |
0.60 |
0.20 |
0.20 |
In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.
|
Activity: |
MHs (Machining) |
Orders (Order Filling) |
|
Product I3 |
5,760 |
112 |
|
Product U8 |
20,800 |
999 |
|
Total |
26,560 |
1,111 |
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
|
Sales and Direct Cost Data: |
Product I3 |
Product U8 |
|
Sales (total) |
$70,400 |
$61,400 |
|
Direct materials (total) |
$36,200 |
$22,100 |
|
Direct labor (total) |
$17,200 |
$34,400 |
What is the overhead cost assigned to Product I3 under activity-based costing?
a. $30,480.00
b. $8,002.00
c. $6,624.00
d. $1,378.00
Summary
The question belongs to Accounting and it discusses about calculation of overhead cost assigned to a product under activity-based costing.
Total Word Count 42
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