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 $6.00 per direct labor-hour Machine processing $3.00 per machine-hour Machine setups $45.00 per setup Production orders $160.00 per order Shipments $115.00 per shipment Product sustaining $775.00 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 1,100 50 Machine-hours 2,800 40 Machine setups 21 2 Production orders 21 2 Shipments 42 2 Product sustaining 2 2

Required: Determine the total overhead cost that would be assigned to each of the products listed above in the activity-based costing system.

Answer 1

	Activity Pools	Amt	K425	M67	Total	Per Driver
	Supporting DL		200	2000	2200	6.00	Per DLH
	Machine Processing		110	50	160	3.00	Per MH
	Setup		2800	40	2840	45.00	Per Setup
	PO		21	2	23	160.00	Per Order
	Shipments		42	2	44	115.00	Per Shipment
	Product Sustaining		2	2	4	775.00	Per Product
	Allocation:	K425	M67
	Supporting DL	1200	12000	(Activity Driver* Rate)
	Machine Processing	330	150	(Activity Driver* Rate)
	Setup	126000	1800	(Activity Driver* Rate)
	PO	3360	320	(Activity Driver* Rate)
	Shipments	4830	230	(Activity Driver* Rate)
	Product Sustaining	1550	1550	(Activity Driver* Rate)
	Total Cost Assigned	137,270	16,050