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Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...

Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:

Processing $ 6,300
Supervising $ 22,320
Other $ 11,400

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 appear below:

MHs
(Processing)		 Batches
(Supervising)
Product M0 14,250 450
Product M5 750 450
Total 15,000 900

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

Product M0 Product M5
Sales (total) $ 82,600 $ 94,900
Direct materials (total) $ 29,500 $ 32,400
Direct labor (total) $ 28,800 $ 42,700

What is the product margin for Product M5 under activity-based costing?

Multiple Choice

  • $107,324.37

  • $11,924.93

  • $5,945.94

  • $138.07

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Answer #1

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The given question is

What is the product margin for Product M5 under activity-based costing?

As per the calculation, the answer is $8325

Particulars Product M5
Sales 94900
Less:
Direct Materials 32400
Direct Labor 42700
Processing Cost (6300*750/15000) 315
Supervising Cost (22320*450/900) 11160
Total Costs 86575
Product Margin 8325
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