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 $ 8 per direct labor-hour Machine processing $ 4 per machine-hour Machine setups $ 45 per setup Production orders $ 150 per order Shipments $ 110 per shipment Product sustaining $ 825 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 950 50 Machine-hours 2,200 40 Machine setups 11 2 Production orders 11 2 Shipments 22 2 Product sustaining 2 2 Required: How much total overhead cost would be assigned to K425 and M67 using 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

Answer 1

Solution

Total Overhead Cost
Activity Cost Pool	K425	M67
Supporting Direct Labor	$       7,600.00	$             400.00
Machine Processing	$       8,800.00	$             160.00
Machine Setups	$           495.00	$               90.00
Production Orders	$       1,650.00	$             300.00
Shipments	$       2,420.00	$             220.00
Product Sustaining	$       1,650.00	$         1,650.00
Total Overhead Cost	$     22,615.00	$         2,820.00

Working

Calculation	(A) Activity for K425	(B) Activity for M67	(C ) Cost per Activity	K425 Overhead Cost (A*C)	M67 Overhead Cost (B*C)
Supporting Direct Labor	950	50	$               8.00	$   7,600.00	$           400.00
Machine Processing	2200	40	$               4.00	$   8,800.00	$           160.00
Machine Setups	11	2	$             45.00	$       495.00	$             90.00
Production Orders	11	2	$           150.00	$   1,650.00	$           300.00
Shipments	22	2	$           110.00	$   2,420.00	$           220.00
Product Sustaining	2	2	$           825.00	$   1,650.00	$       1,650.00
Total Cost	$ 22,615.00	$       2,820.00