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: | |
Equipment depreciation | $39,000 |
Supervisory expense | $9,200 |
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 | 5,940 | 186 |
Product U8 | 15,300 | 988 |
Total | 21,240 | 1,174 |
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) | $70,000 | $62,300 |
Direct materials (total) | $30,800 | $15,200 |
Direct labor (total) | $16,100 | $31,800 |
What is the product margin for Product I3 under activity-based costing? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.) |
$12,877 | |
$13,657 | |
$17,437 | |
$3,437 |
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