Question

Rosenbrook Corporation has provided the following data from its activity-based costing system:

               

	Activity Cost Pool	Total Cost	Total Activity                RM
	Assembly................................	RM710,770	37,000	machine-hours   9797.1
	Processing orders..................	RM39,690	1,800	Orders                1764
	Inspection...............................	RM119,116	1,940	inspection-hours 614

	Activity Cost Pool	Total Cost	Total Activity                RM
	Assembly................................	RM710,770	37,000	machine-hours   9797.1
	Processing orders..................	RM39,690	1,800	Orders                1764
	Inspection...............................	RM119,116	1,940	inspection-hours 614

Data concerning one of the company’s products, Product H73N, appear below:

	Selling price per unit................................................	RM320.00
	Direct materials cost per unit..................................	RM34.94
	Direct labor cost per unit.........................................	RM49.21
	Annual unit production and sales..........................	460
	Annual machine-hours.............................................	510
	Annual orders............................................................	80
	Annual inspections...................................................	10

According to the activity-based costing system, the product contribution margin for product H73N is:

A.

RM7,275.90

B.

RM8,142.00

C.

RM108,491.00

D.

RM100,349

Answer 1

Activity rate = Estimated Overheads/Estimated Driver
Cost Pool	Total cost	Total Activity	Activity Rate
Assembly	710,770.00	37,000.00	19.21
Processing Orders	39,690.00	1,800.00	22.05
Inspection	119,116.00	1,940.00	61.4
Calculation of product contribution margin
Total Sales	147,200.00
Direct material	16,072.40
Direct labor	22,636.60
Product Contribution Margin	108,491.00
Hence, the answer is c. RM 108,491
Note: Fixed overhead costs are not considered in calculation of contribution margin