Question
Vassallo Corporation's activity-based costing system has three cost pools: Machining, Set Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect
Vassallo Corporation's activity-based costing system has three cost pools: Machining, Set Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Equipment depreciation $64,000 Indirect labor 4,000 Distribution of Resource Consumption by Cost Pool
Machining Set Up Other Total Equipment depreciation $12,800 $19,200 $32,000 $64,000 Indirect labor 2,000 400 1,600 4,000 Total $14,800 $19,600 $33,600 $68,000
Costs in the Machining 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.
MHs Batches Product R3 3,800 300 Product D6 16,200 700
Additional data concerning the company's products appears below: Product R3 Product D6 Sales $168,700 $185,600 Direct materials 77,800 72,300 Direct labor 75,800 79,300 Required: a) Calculate activity rates for each activity cost pool using ABC. b) Determine the amount of overhead cost that would be assigned to each product using ABC. c) Determine the product margins for each product using ABC.
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