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 | $ | 107,000 | |||||
Supervisory expense | $ | 9,900 | |||||
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 W1 | 5,630 | 118 |
Product M0 | 17,400 | 900 |
Total | 23,030 | 1,018 |
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) | $ | 79,600 | $ | 63,600 | ||||||
Direct materials (total) | $ | 33,700 | $ | 14,400 | ||||||
Direct labor (total) | $ | 23,600 | $ | 31,400 | ||||||
What is the product margin for Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places.)
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