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	$	70,000
Supervisory expense	$	10,700

Distribution of Resource Consumption Across Activity Cost Pools:

	Activity Cost Pools
	Machining	Order Filling		Other
Equipment depreciation	0.50	0.20		0.30
Supervisory expense	0.50	0.10		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	5,400	101
Product M0	18,300	960
Total	23,700	1,061

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)	$	64,700	$	63,700
Direct materials (total)	$	34,700	$	15,400
Direct labor (total)	$	17,400	$	28,200

What is the product margin for Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places.)

Answer 1

				Order
			Machining	Filling	Other
Equipment Depreciation			35000	14000	21000
Supervisory Expense			5350	1070	4280
total overhead expense			40350	15070	25280
Second stage
			Maching	orders	total
Product W1			9194	1435	10628
Product M0			31156	13635	44792
Total expense distributed			40350	15070	55420
Machining per hr=		40350/23700		1.70
per order cost =		15070/1061		14.20
	product margin of W1
	sales			64,700
	less:
	Direct materials			34,700
	Direct labor			17,400
	overhead			10,628
	product margin			1,972	answer
	if 1972 shows incorrect then try 1986