Question

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

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

 Machining \$ 15,800 Order Filling \$ 6,400 Other \$ 9,800

Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

 MHs (Machining) Orders (Order Filling) Product O4 4,800 300 Product S1 15,200 1,700

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

 Product O4 Product S1 Sales (total) \$ 70,200 \$ 112,200 Direct materials (total) \$ 23,900 \$ 44,300 Direct labor (total) \$ 38,900 \$ 46,700

a) (Multiple Choice) The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:

A) \$1.18 per order

B) \$1.00 per order

C) \$3.20 per order

D) \$16.00 per order

b) What is the overhead cost assigned to Product S1 under activity-based costing?

c) What is the product margin for Product S1 under activity-based costing?

 a Order Filling overhead cost 6400 Divide by Orders 2000 =300+1700 Activity rate for the Order Filling activity 3.20 Option C \$3.20 per order is correct b Machining activity rate 0.79 =15800/(4800+15200) Machining 12008 =15200*0.79 Order Filling 5440 =1700*3.20 Overhead cost assigned to Product S1 17448 c Sales 112200 Less: Costs Direct materials 44300 Direct labor 46700 Overhead cost 17448 Total costs 108448 Product margin for Product S1 3752