Question

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below:

Overhead costs:

Equipment depreciation	$	110,000
Supervisory expense	$	6,900

Distribution of Resource Consumption Across Activity Cost Pools:

	Activity Cost Pools
	Machining	Order Filling		Other
Equipment depreciation	0.40	0.30		0.30
Supervisory expense	0.40	0.20		0.40

In the second stage, 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:

	MHs (Machining)	Orders (Order Filling)
Product W1	5,570	180
Product M0	18,400	990
Total	23,970	1,170

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

Sales and Direct Cost Data:

	Product W1		Product M0
Sales (total)	$	76,500	$	67,100
Direct materials (total)	$	33,000	$	16,000
Direct labor (total)	$	20,100	$	31,400

What is the overhead cost assigned to Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places and your final answer to nearest whole dollar amount.)

Multiple Choice

• $5,288

• $16,150

• $10,862

• $46,760

Answer 1

• Correct Answer = Option #2: $ 16,150

Overhead cost assigned to Product W1:
Machining cost	$10,862	[5570 MH x $ 1.95]
Order Filling Cost	$5,288	[180 orders x $ 29.38]
Total	$16,150	Answer

--Working

		Machining	Order Filling	Other	Total
	Equipment depreciation	$44,000	$33,000	$33,000	$110,000
	Supervisory expense	$2,760	$1,380	$2,760	$6,900
A	Total	$46,760	$34,380	$35,760
B	Total Allocation base	23970	1170
C = A/B	Allocation rate	$1.95	$29.38