Question

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...

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

Homework Answers

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

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