Question:

Al Amar Manufacturing company's activity-based costing system has three cost pools: Machining, Set Up, and Other. The overhead costs of the company consist of equipment depreciation and indirect labor which are allocated to the cost pools in proportion to the activity cost pools' consumption of resources.

Equipment depreciation	OMR 50,000
Indirect labor	OMR 5,000

Distribution of Resource Consumption by Cost Pool

	Machining	Set Up	Other	Total
Equipment depreciation	OMR10,000	OMR20,000	OMR20,000	OMR50,000
Indirect labor	OMR 2,000	OMR 1,000	OMR 2,000	OMR 5,000
Total	OMR12,000	OMR21,000	OMR22,000	OMR55,000

Costs in the Machining cost pool are assigned to products based on machine-hours and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products.

	Machine Hours	Batches
Product X	3,500	300
Product Y	16,000	700

Additional data concerning the company's products appears below:

	Product X	Product Y
Sales	OMR165,000	OMR180,000
Direct materials	OMR 75,000	OMR 70,000
Direct labor	OMR 72,000	OMR 75,000

Required:

	Calculate activity rates for each activity cost pool using ABC. (1 Mark)
	Determine the amount of overhead cost that would be assigned to each product using ABC. (2 Marks)
	Determine the product margins for each product using ABC. (2 Marks)