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		$10.00	per direct labor-hour
Machine processing		$3.00	per machine-hour
Machine setups		$35.00	per setup
Production orders		$150.00	per order
Shipments		$120.00	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	1,075	30
Machine-hours	3,000	20
Machine setups	11	2
Production orders	11	2
Shipments	22	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

K425 :

Activity Cost Pool Activity Rates Activity Activity based cost   

Supporting direct labor   $10.00 per direct labor-hour 1075 $10750

Machine processing   $3.00 per machine-hour 3000 9000

Machine setups $35.00  per setup 11 385

Production orders $150 per order 11 1650

Shipments $120.00  per shipment 22 2640

Product sustaining   $775.00 per product 2 1550

  total overhead cost =   $25975

M67 :

Activity Cost Pool Activity Rates Activity Activity based cost   

Supporting direct labor   $10.00 per direct labor-hour 30 300

Machine processing   $3.00 per machine-hour 20 60

Machine setups $35.00  per setup 2 70

Production orders $150 per order 2 300

Shipments $120.00  per shipment 2 240

Product sustaining   $775.00 per product    2 1550

total overhead cost = $2520