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
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: |
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|
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Equipment depreciation | $22,000 |
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Supervisory expense | $6,000 |
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Distribution of Resource Consumption across Activity Cost Pools |
Activity Cost Pools: |
Machining |
Order Filling |
Other |
Equipment depreciation | 50% | 30% | 20% |
Supervisory expense | 50% | 20% | 30% |
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 (Processing) | Batches (Supervising) |
Product I3 | 5,400 | 100 |
Product U8 | 14,600 | 900 |
Total | 20,000 | 1,000 |
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) | $53,300 | $60,100 |
Direct materials (total) | $29,700 | $14,000 |
Direct labor (total) | $16,000 | $25,300 |
What is the overhead cost assigned to Product I3 under activity-based costing?
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