Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $ 92,000
Supervisory expense $ 4,000

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 0.30 0.20 0.50

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 4,200 800
Product M0 15,800 200
Total 20,000 1,000

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) $ 236,500 $ 262,000
Direct materials (total) $ 90,900 $ 123,900
Direct labor (total) $ 110,400 $ 76,100

What is the product margin for Product W1 under activity-based costing?

Multiple Choice
  • $7,996
  • $23,356
  • $12,800
  • $35,200

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting A Global Perspective

Authors: Robert Libby, Patricia Libby, Daniel G Short

5th Edition

0071107746, 978-0071107747

More Books

Students also viewed these Accounting questions