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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
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 Supervisory expense $ 91,000 $ 12,300 Distribution of Resource Consumption Across Activity Cost Pools: Equipment depreciation Supervisory expense Activity Cost Pools Machining 0.60 0.60 Order Filling Other 0.30 0.20 0.10 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 W1 Product MO 6,050 198 21,800 999 27,850 1,197 Total Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. Sales and Direct Cost Data:
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