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	$	9	per direct labor-hour
Machine processing	$	3	per machine-hour
Machine setups	$	40	per setup
Production orders	$	150	per order
Shipments	$	120	per shipment
Product sustaining	$	875	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	950	50
Machine-hours	2,400	40
Machine setups	13	2
Production orders	13	2
Shipments	26	2
Product sustaining	2	2

Required:

How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

Activity Cost Pool	K425	M67
Supporting direct labor
Machine processing
Machine setups
Production orders
Shipments
Product sustaining
Total overhead cost	$0	$0

Answer 1

	K425	M67
Supporting direct labor	$8,550 ($9 x 950 DLH)	$450 ($9 x 50 DLH)
Machine processing	$7,200 ($3 x 2,400 machine Hours)	$120 ($3 x 40 machine Hours)
Machine setups	$520 ($40 x 13 Machine set ups)	$80 ($40 x 2 Machine set ups)
Production orders	$1,950 ($150 x 13 Production orders)	$300 ($150 x 2 Machine set ups)
Shipments	$3,120 ($120 x 26 shipments)	$240 ($120 x 2 shipments)
Product sustaining	$1,750 ($875 x 2 Product sustaining)	$1,750 ($875 x 2 Product sustaining)
Total overhead cost	$23,090	$2,940