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 | $23,000 |
Supervisory expense | $12,000 |
Distribution of Resource Consumption Across Activity Cost Pools: | |||
Activity Cost Pools | |||
Machining | Order Filling | Other | |
Equipment depreciation | 0.60 | 0.20 | 0.20 |
Supervisory expense | 0.60 | 0.10 | 0.30 |
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 (Machining) | Orders (Order Filling) | |
Product I3 | 6,250 | 145 |
Product U8 | 23,400 | 1,000 |
Total | 29,650 | 1,145 |
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) | $67,200 | $63,300 |
Direct materials (total) | $31,700 | $15,600 |
Direct labor (total) | $23,100 | $31,300 |
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.) |
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