Question

Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Activity Rates Supporting direct labor $ 8 per direct labor-hour Machine processing $ 3 per machine-hour Machine setups $ 35 per setup Production orders $ 160 per order Shipments $ 115 per shipment Product sustaining $ 750 per product Activity data have been supplied for the following two products: Total Expected Activity K425 M67 Number of units produced per year 200 - 2,000 Direct labor-hours 1,100 - 40 Machine-hours 3,200 - 30 Machine setups 11 - 1 Production orders 11 - 1 Shipments 22 - 1 Product sustaining 1 - 1

Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

Answer 1

Activity Cost Pool	K425	M67
Supporting direct labor	8800	320
Machine processing	9600	90
Machine setups	385	35
Production orders	1760	160
Shipments	2530	115
Product sustaining	750	750
Total overhead cost	23825	1470
Workings:
Activity Cost Pool	K425	M67
Supporting direct labor	=1100*8	=40*8
Machine processing	=3200*3	=30*3
Machine setups	=11*35	=1*35
Production orders	=11*160	=1*160
Shipments	=22*115	=1*115