Question
Sams Corporation has an activity-based costing system with three activity cost pools-Processing, Setting Up, and Other. The company's overhead costs, which consist of factory utilities
Sams Corporation has an activity-based costing system with three activity cost pools-Processing, Setting Up, and Other. The company's overhead costs, which consist of factory utilities and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Costs in the Processing cost pool are assigned to products based on machine-hours (MHs) 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. Data concerning the two products and the company's costs and activity-based costing system appear below:
Factory Utilities 64,000
Indirect Labor 50,000
Distribution of Resource Consumption Across Activity Cost Pools
Processing Setting up Other 0.3 0.2 0.1 Batches 300 600 900 Product V3 298,000 114,800 35,600 0.5 0.2 Factory Utilities Indirect Labor 0.7 MHs Product H5 Product V3 Total 5,000 1,000 4,000 300,000 115,400 Sales Direct Materials Direct Labor Product H5 65,400
Required: a. Assign overhead costs to activity cost pools using activity-based costing. b. Calculate activity rates for each activity cost pool using activity-based costing. c. Determine the amount of overhead cost that would be assigned to each product using activity-based costing. d. Determine the product margins for each product using activity-based costing.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started