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Scheuer Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment expense and indirect labor--to
Scheuer Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment expense and indirect labor--to three activity cost pools--Processing, Supervising, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment expense $55,000 Indirect labor $ 7,000 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Processing Supervising Other Equipment expense 0.10 0.70 0.20 Indirect labor 0.50 0.10 0.40 In the second stage, Processing costs are assigned to products using machine-hours (MHS) and Supervising costs are assigned to products using the number of batches. The costs in the other activity cost pool are not assigned to products. Activity data for the company's two products follow: Activity: MHS Batches (Processing) (Supervising) Product Q1 1,000 700 Product S6 19,000 1,300 Total 20,000 2,000 Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. Sales and Direct Cost Data: Product Product Q1 S6 Sales (total) $134,600 $186,300 Direct materials (total) $ 76,000 $ 64,800 Direct labor (total) $ 40,800 $ 78,400 What is the overhead cost assigned to Product Q1 under activity-based costing
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