Question
In: Finance
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:
| Processing | $ | 6,250 |
| Supervising | $ | 36,040 |
| Other | $ | 12,200 |
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
| MHs (Processing) |
Batches (Supervising) |
|
| Product M0 | 11,800 | 850 |
| Product M5 | 700 | 850 |
| Total | 12,500 | 1,700 |
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
| Product M0 | Product M5 | |||
| Sales (total) | $ | 87,100 | $ | 98,900 |
| Direct materials (total) | $ | 30,300 | $ | 33,200 |
| Direct labor (total) | $ | 29,600 | $ | 43,500 |
What is the product margin for Product M5 under activity-based costing?
Solutions
Expert Solution
Compute the processing cost assigned to product M5, using the equation as shown below:
Assigned cost = Total processing cost*Machine hours used by Product M5/ Total machine hours
= $6,250*700 hours/ 12,500 hours
= $350
Hence, the processing cost assigned to product M5 is $350.
Compute the supervising cost assigned to product M5, using the equation as shown below:
Assigned cost = Total supervising cost*Batched used by product M5/ Total batches used
= $36,040*850/ 1,700
= $18,020
Hence, the supervising cost assigned to product M5 is $18,020.
Compute the product margin for product M5, using the equation as shown below:
Product margin = Sales – Direct material – Direct labor – Processing cost – Supervising cost
= $98,900 - $33,200 - $43,500 - $350 - $18,020
= $3,830
Hence, the product margin for product M5 is $3,830.
jeff jeffy answered 6 months agoRelated Solutions
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Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
Mirabile Corporation uses activity-based costing to compute
product margins. Overhead costs have already been allocated to the
company's three activity cost pools--Processing, Supervising, and
Other. The costs in those activity cost pools appear below:
Processing
$
5,945
Supervising
$
19,680
Other
$
11,300
Processing costs are assigned to products using machine-hours
(MHs) and Supervising costs are assigned to products using the
number of batches. The costs in the Other activity cost pool are
not assigned to products. Activity data appear...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
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product margins. Overhead costs have already been allocated to the
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Other. The costs in those activity cost pools appear below:
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Supervising
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Processing costs are assigned to products using machine-hours
(MHs) and Supervising costs are assigned to products using the
number of batches. The costs in the Other activity cost pool are
not assigned to products. Activity data appear...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
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product margins. Overhead costs have already been allocated to the
company's three activity cost pools--Processing, Supervising, and
Other. The costs in those activity cost pools appear below:
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