Question
The following information is available for Dakota Company: Product 1 Product 2 Sales $1,400,000 $1,800,000 Direct materials (200,000) (400,000) Direct labor (600,000) (600,000) Manufacturing overhead*
The following information is available for Dakota Company:
Product 1
Product 2
Sales
$1,400,000
$1,800,000
Direct materials
(200,000)
(400,000)
Direct labor
(600,000)
(600,000)
Manufacturing overhead*
(500,000)
(500,000)
Gross margin
$100,000
$300,000
*allocated based on direct labor hours
Dakota Company has decided to allocate its manufacturing overhead cost using activity-based costing. Manufacturing overhead will be allocated based on batch-level and product line manufacturing as follows:
Total
Manufacturing
Overhead Costs
Product 1
Product 2
Batch-level manufacturing overhead
$600,000
20 batches
60 batches
Product line manufacturing overhead
$400,000
10 lines
40 lines
What is Dakota Company's gross margin for Product 1 using activity based costing?
- $520,000
- $370,000
- $450,000
- $400,000
Which one is the correct answer?
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Access For Computer Accounting
Authors: Donna Kay
19th Edition
1259741109, 9781259741104
