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	$	7.00	per direct labor-hour
Machine processing	$	3.00	per machine-hour
Machine setups	$	45.00	per setup
Production orders	$	160.00	per order
Shipments	$	130.00	per shipment
Product sustaining		825.00	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	925	50
Machine-hours	2,400	40
Machine setups	21	3
Production orders	21	3
Shipments	42	3
Product sustaining	3	3

Determine the total overhead cost that would be assigned to each of the products listed above in 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

Activity Cost Pool	K425				Total
	Direct labor-hours	925	Cost per direct labor-hour	7	Supporting direct labor	6475
	Machine-hours	2,400	Cost per machine-hour	3	Machine processing	7200
	Machine setups	21	Cost per setup	45	Machine setups	945
	Production orders	21	Cost per order	160	Production orders	3360
	Shipments	42	Cost per shipment	130	Shipments	5460
	Product sustaining	3	Cost per product	825	Product sustaining	2475
Total overhead cost						25915
Activity Cost Pool	M67
	Direct labor-hours	50	Cost per direct labor-hour	7	Supporting direct labor	350
	Machine-hours	40	Cost per machine-hour	3	Machine processing	120
	Machine setups	3	Cost per setup	45	Machine setups	135
	Production orders	3	Cost per order	160	Production orders	480
	Shipments	3	Cost per shipment	130	Shipments	390
	Product sustaining	3	Cost per product	825	Product sustaining	2475
Total overhead cost						3950
Total overhead cost of K425				25915
No. of units produced of K425				200
	Per Unit Overhead cost			129.575
Total overhead cost of M67				3950
No. of units produced of M67				2000
	Per Unit Overhead cost			1.975