Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...


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 below:

	MHs (Processing)	Batches (Supervising)
Product M0	13,700	400
Product M5	800	400
Total	14,500	800

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

	Product M0		Product M5
Sales (total)	$	81,800	$	94,400
Direct materials (total)	$	29,400	$	32,300
Direct labor (total)	$	28,700	$	42,600

What is the product margin for Product M5 under activity-based costing?

Multiple Choice

$23,700

$19,500

$9,332

$8,243

Solutions

Expert Solution

Correct Answer--- $9,332

Calculations

Cost Drivers Rate
Activity	Cost Drivers	Total Activity Amount (A)	Level of Activity (B)	Activity Rate (C=A/B)

Processing	Machine Hours	$ 5,945.00	14500.00	$ 0.41	Per Machine Hour
Supervising	Number of Batches	$ 19,680.00	800.00	$ 24.60	Per batch

		$ 25,625.00

Product M5	Activity rate(A)	Activity Driver Incurred (B)	Overhead Assigned (C=A*B)
Processing	$ 0.41	800	$ 328.00
Supervising	$ 24.60	400	$ 9,840.00


Total Overheads			$ 10,168.00

Calculation of Product margin

	Product M5
Sales	$ 94,400.00
Direct material cost	$ 32,300.00
Direct Labor	$ 42,600.00
Overheads Allocation	$ 10,168.00
Total product margin	$ 9,332.00

ekkarill92 answered 2 years ago

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