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 | $ | 6 | per direct labor-hour |
| Machine processing | $ | 4 | per machine-hour |
| Machine setups | $ | 50 | per setup |
| Production orders | $ | 90 | per order |
| Shipments | $ | 14 | per shipment |
| Product sustaining | $ | 840 | 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 | 80 | 500 |
| Machine-hours | 100 | 1,500 |
| Machine setups | 1 | 4 |
| Production orders | 1 | 4 |
| Shipments | 1 | 10 |
| Product sustaining | 1 | 1 |
Required:
How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?
| Activity | Rate | Product K425 | |||
| Driver | OH cost | ||||
| Suporting labor | 6 | 80 | 480 | ||
| Machine processing | 4 | 100 | 400 | ||
| Machine setups | 50 | 1 | 50 | ||
| Production orders | 90 | 1 | 90 | ||
| Shipments | 14 | 1 | 14 | ||
| Product Sustaining | 840 | 1 | 840 | ||
| Total Overheads of Product K425 | 1874 | ||||
| Activity | Rate | Product M67 | |||
| Driver | OH cost | ||||
| Suporting labor | 6 | 500 | 3000 | ||
| Machine processing | 4 | 1500 | 6000 | ||
| Machine setups | 50 | 4 | 200 | ||
| Production orders | 90 | 4 | 360 | ||
| Shipments | 14 | 10 | 140 | ||
| Product Sustaining | 840 | 1 | 840 | ||
| Total Overheads of Product M67 | 10540 |
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