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 | $ 88,000 | |
Supervisory expense | $ 12,700 |
Distribution of Resource Consumption Across Activity Cost Pools:
Activity Cost PoolsMachiningOrder FillingOtherEquipment depreciation0.500.300.20Supervisory expense0.500.200.30
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 W1 | 5,540 | 142 |
Product M0 | 15,800 | 924 |
Total | 21,340 | 1,066 |
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) | $ 73,000 | $ 63,800 | |
Direct materials (total) | $ 37,900 | $ 19,600 | |
Direct labor (total) | $ 16,300 | $ 35,100 |
What is the product margin for Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places.)
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