1 ) Kenrick Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment expense and indirect labor-to three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below:

Overhead costs:

Equipment expense $18,000

Indirect labor $2,000

Distribution of Resource Consumption across activity cost pools

Activity cost pools

Processing supervising other

Equipment expense .10 .30 .60

Indirect labor .30 .40 .30

In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:

Activity

MHs (processing) Batches (supervising)

Product U4 5,500 600

Product C7 4,500 1,400

Total 10,000 2,000

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

Sales and Direct Cost Data:

Product U4 Product C7

Sales (total) 58,400 31,800

Direct materials (total) 26,900 13,900

Direct Labor (total) 25,000 11,200

What is the product margin for Product U4 under activity-based costing?

What is the product margin for Product U4 under activity-based costing?

a)		-$3,500
b)		$3,320
c)		$6,500
d)		$5,180