Question
Doede 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
Doede 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 | $48,000 |
Supervisory expense | $6,500 |
Distribution of Resource Consumption Across Activity Cost Pools:
Activity Cost Pools | |||
Machining | Order Filling | Other | |
Equipment depreciation | 0.40 | 0.30 | 0.30 |
Supervisory expense | 0.40 | 0.20 | 0.40 |
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 W1 | 5,890 | 161 |
Product M0 | 22,800 | 989 |
Total | 28,690 | 1,150 |
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. Sales and Direct Cost Data:
Product W1 | Product M0 | |||
Sales (total) | $ | 59,400 | $ | 65,000 |
Direct materials (total) | $ | 29,700 | $ | 15,600 |
Direct labor (total) | $ | 20,300 | $ | 34,200 |
What is the product margin for Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places.)
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$6,714
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$2,726
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$7,286
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$3,506
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