Question

Marquette Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other....

Marquette Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. 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:

Activity Cost Pools

Costs

Processing

$111,600

Setting up

$25,400

Other

$57,000

MHs

Batches

Product Golden

8,000

200

Product Eagle

12,000

800

Total

20,000

1,000

Product Golden

Product Eagle

Sales (total)

$315,300

$401,100

Direct materials (total)

$72,600

$145,200

Direct labor (total)

$106,400

$96,200

REQUIRED

    1. Calculate the activity rate for the Processing Cost Pool using activity-based costing.
    1. Calculate the activity rate for the Setting Up Cost Pool using activity-based costing
    1. Compute the amount of overhead cost that would be assigned to Product Golden.
    1. Determine the product margin for Product Golden using activity-based costing.

Homework Answers

Answer #1
Computation of Activity Rates
Cost Pools Costs Drivers Volume Rate
Processing $ 111,600.00 MHs 20000 $      5.58
Setting Up $   25,400.00 No. of batches 1000 $   25.40
Computation of OH cost to be assigned to Product Golden
Particulars Amount
Processing (8000 x $ 5.58) $   44,640.00
Setting Up (200 x $ 25.40) $     5,080.00
$   49,720.00
Computation of Product Margin for Product Golden
Sales $ 315,300.00
Less: Costs
Direct materials $   72,600.00
Direct Labor $ 106,400.00
OH $   49,720.00 $ 228,720.00
Product Margin $   86,580.00
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