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 $ 7 per direct labor-hour Machine processing $ 2 per machine-hour Machine setups $ 45 per setup Production orders $ 160 per order Shipments $ 125 per shipment Product sustaining $ 850 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 1,125 50 Machine-hours 3,600 40 Machine setups 17 3 Production orders 17 3 Shipments 34 3 Product sustaining 3 3 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

Answer 1

	K425	M67
Supporting direct labor	7875	350
Machine processing	7200	80
Machine setups	765	135
Production orders	2720	480
Shipments	4250	375
Product sustaining	2550	2550
Total overhead cost	25360	3970
Workings:
	K425	M67
Supporting direct labor	=1125*7	=50*7
Machine processing	=3600*2	=40*2
Machine setups	=17*45	=3*45
Production orders	=17*160	=3*160
Shipments	=34*125	=3*125
Product sustaining	=850*3	=850*3