Question
Walsh 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
Walsh 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 |
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. Activity:
MHs (Machining) | Orders (Order Filling) | |
Product Q! | 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 Q1 | Product S6 | |||
Sales (total) | $ | 134,600 | $ | 186,300 |
Direct materials (total) | $ | 76,000 | $ | 64,800 |
Direct labor (total) | $ | 40,800 | $ | 78,400 |
What is the product margin for Product Q1 under activity-based costing?
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